A Market Ready To Bounce?
Sid Klein | Aug 05, 2014 03:37PM ET
Dow
This month's weekend report expressed the view that the 200-day MA would not be broken,and that the low would be only slightly below Friday's close. After today's market action, I reaffirm those views. The insightfulness of the Poles' military analytic abilities aside, the idea that a significant decline today was because of the news of their analyses smells like a set-up for a low. After all, it would/will be easy to use related news to explain a countertrend rally, citing the "more important" favourable earnings news background (while also citing a minor abatement on the Uke front). Of course, rookies know (or should) that earnings are strongest after the peak, making now a time to discount slowing earnings, therefore, and suffer falling multiples. Therein lies both the loss of any positive leverage stemming from favourable earnings...and the rub.
Bad news is bad news, and good news is ignored in favour of bad news. Such are bear markets.
Regarding targets, yesterday's numbers are unchanged. So, let us look at the 6-month Dow chart. The red line is the 200-day MA. (The 50-day MS (blue line) will act as a magnet for the countertrend rally.
6-month Dow chart
The slow and fast stochastic are oversold, including potentially completed Elliott patterns.
The latter analysis is unconventional and should be taken with a grain of salt, but it is true nonetheless to say that these momentum indicators are positioned in a manner that is consistent with a market readying to bounce.
PMs
The only good thing that could be said about today's action in the PMs is that the SPDR Gold Trust,ד (ARCA:GLD) fast stochastic maintained its bullish divergence.
Both the slow and fast stochastic have all but completed their declines, using Elliott analysis; again, it is not conventional analysis to use Elliott in this manner. Most importantly, we note the divergence between gold and silver today (Tuesday). The GLD 6-month chart follows immediately below:
GLD 6-month chart
Get The News You Want
After today, we are hoping that silver takes its lead from gold, as opposed to the other way around. The 6-month SLV chart is followed by the 6-month JJC chart,so as to reflect "Dr. Copper's" own bad day.
Simply, silver traded as an industrial metal on a day that the market was down sharply. There are growing concerns regarding questionable economic fundamentals over the longer term, particularly when taking a global perspective.
The weekend report discussed a flush-out by today, if one were to occur, and now we'll see the strength of the $19 support level (I had believed that the $19.30 gap zone would hold).
If gold hold holds, forget copper and any related considerations!
Following up on yesterday's commentary, a decline this week would roll over both the 200 and 50-day MAs. However, a reversal tomorrow would take the momentum indicators back up, perhaps creating the Golden Cross discussed in this month's report.
iShares Silver Trust (ARCA:SLV) 6-month chart
iPath DJ-UBS Copper Subindex TR (NYSE:JJC) 6-month chart
Also discussed yesterday was the likelihood of the Dollar's slow stochastic likely having seen its high.
However, I pointed out that a final price high has, to-date, tended to be made on a stochastic divergence.
Today's high may conceivably have been it. If so, a positive currency driver for the PMs could present itself, as well.
PowerShares db USD Index Bullish (NYSE:UUP) 6-month chart
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.