The Technicals On Volatility
Tim Ord | Jan 31, 2013 01:36PM ET
- SPX: Neutral Monitoring purposes
- GOLD: Gold ETF GLD long at 173.59 on 9/21/11
- Long Term Trend monitor purposes: Flat.
The gap that formed on January 2 could be a “Mid Point Gap” which is similar to the other “Mid point Gap” that formed on August 3, 2012. “Mid Point Gaps” show up at the half way point of the move. The August 3, 2013 gap did give a projection near 146 range which was near the top. The current potential “Mid Point Gap” gives a projection to 155 which is still five points higher from the current level. Notice the VIX has turned up suggesting a consolidation has started. The potential Consolidation could be more sideways (like in the August 2012 consolidation) before heading higher. The top window is the Rate of Change (ROC) for the VIX. When the ROC for the VIX reaches +12% a short term low has formed on the SPY and something we will be watching for. Other Bullish signs will be for the TRIN to close above 1.50 and TICK close below -300 range. Bigger trend is up.
Going back to September 2012 in blue arrows, we pointed to the day’s where the FOMC meeting concluded and today is the conclusion of the FOMC meeting. The three prior FOMC meetings all represented at least short term reversals in the market and it appears that is what happening here. The daily RSI reached 75.63 yesterday and is extended. The potential retracement may be shallow finding support near 149. Bullish signs will be for a TRIN close above 1.50 and a Tick close less than -300 and would also like to see the ROC of the VIX to reache +12%. Upside target is near the 155 range on the SPY.
Yesterday we showed the monthly HUI/SPX ratio which the RSI and Slow Stochastics was in bullish territory but have not turned up yet. Above is the monthly XAU/Gold ratio. Bullish signals are triggered when the monthly RSI of the XAU/Gold ratio turns up from below 35 (current reading 31.46) and the Slow Stochastics turns up (preferably below 20) with the current reading of 21.55. Both the RSI and Slow Stochastics are still trending down however the RSI is in bullish territory and Slow Stochastics is close enough to the bullish level as a turn up from here will trigger a bullish signal. Since this chart is the on the monthly time frame the earliest signal that could be triggered is February close. The last signals of this type lead to a two month rally in 2012. Previous signals lasted over a year. There are cycles for a low due in May and may the time that these signals are triggered. Gold bull market usually last near 20 years and this one started in 2000 and suggests there is another seven years left, give or take a couple of years. The last part of the bull market normally produces the best results and gets in everyone, including your grandmother. So watch out when the elders are telling you to buy gold stocks because that comes near the end.
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Long NG at 5.14 on 10/8/12. Long GDX 58.65 on 12/6/11. Sold SLV at 30.24 on 12/19/12 = gain 2.6%; Long SLV at 29.48 on 10/20/11. Long GDXJ average 29.75 on 4/27/12. Long GLD at 173.59 on 9/21/11. Long BRD at 1.67 on 8/3/11. Long YNGFF .44 on 7/6/11. Long EGI at 2.16, on 6/30/11. Long GLD at 147.14 on 6/29/11; stop 170 hit = gain 15.5% . Long KBX at 1.13 on 11/9/10. Long LODE at 2.85 on 1/21/11. Long UEXCF at 2.07 on 1/5/11.
We will hold as our core position in AUQ, CDE and KGC because in the longer term view these issues will head much higher. Holding CDE (average long at 27.7. Long cryxf at 1.82 on 2/5/08. KGC long at 6.07. Long AUQ average of 8.25.
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