SPX And Gold; Pivotal Points At Hand

Leaving aside our usual inclusion of macro fundamentals and market ratios, today let’s take a simple technical look at the S&P 500 and gold.

As the US stock market was becoming deeply oversold (and over-hated, sentiment-wise) in December we planned for a holiday seasonal bounce, which finally arrived with the immediate reversal after the Christmas Eve massacre when the machines (and a few human casino patrons) drove it to its downside climax. The bounce was almost a certainty, given the sentiment backdrop of the moment.

Our (NFTRH) view however, has been for an eventual decline from a significant momentum divergence (MACD & RSI) to the obvious support of 2100-2200 (which is also the rough measurement from the bearish pattern) on SPX per this weekly chart. The current market bounce was expected and necessary to rebuild the conditions for enough downside to meet our target.

But with a bounce, especially a powerful one coming off unsustainably poor sentiment, comes the question of whether it is just a bounce or is it something more? In markets nothing is certain and anyone claiming to have an answer to this question is simply selling confidence or a cemented viewpoint.

We had a probabilities and technical based projection of a strong but ultimately doomed bounce, and it has played out well. But we should also have a complete willingness to admit if/when wrong (about the doomed part). As of this writing the projection is not wrong; it is 100% on track to our intervening SPX bounce target of 2600-2650. The down-sloping SMA 50 has kissed this pig, right on the lips.

spx

But a break through the SMA 50 would start to get market bears a little hot under the collar.

One thing that market bears have going for them is the VIX, which along with several other sentiment indicators that we track each week in NFTRH, indicates that the risk to a bearish view is much reduced now compared to December.

So if the cyclical, risk ‘on’ world is thought to be just bouncing what of the counter-cyclical asset, gold? The decision point for gold is that of ‘new bull market?’ or ‘no new bull market?’. Let’s use daily and monthly charts to answer these questions.

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