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TIMER DIGEST SIGNALS:
STOCKS – NEUTRAL
Barring a surprise downdraft in October, the more time passes, the greater the likelihood that the August 9 low (SPX 1102) was THE low. We retested that low on August 22 at 1121.68 and it was immediately followed by a Leibovit Positive Volume Reversal. We tried to breakdown under it, but we couldn’t get further than 1136.07 this past Monday. The ‘usual’ seasonal pattern is a mid-September high followed by an early October low. As you know, I am thinking of waiting to put out a BUY signal until at least next week’s FOMC meeting and possibly early October, because I am impressed by the strength in Nasdaq and the fact that many indexes have managed to close above their respective 50 day moving averages. The Autumnal Equinox comes this Friday (September 23) and, generally speaking, markets tend to change intermediate direction within a couple of weeks of these seasonal planetary events. The news environment is dismal at best, but courtesy of the Plunge Protection Team (PPT) and the decision on their part to now bail out Europe (again) trillions of dollars will be sloshing around and Wall Street is clearly expecting a repeat of 2010 – a rally to new highs following the summer swoon. I am risking another market swoon into October, but I sense a ‘market consensus’ that this is going to happen, so fading the crowd may be the best course of action. Making a move like this is no way a reflection of the clearly negative and geo-political risks existing at this time – including the upcoming Palestinian vote at the United Nations. It would be a decision based on cyclical and technical action in the markets which often are at odds with real world events. Stay tuned.
GOLD – NEUTRAL
European banks are rushing to use their gold to access much-needed dollar funding, in the latest sign of the growing liquidity crunch for the continent’s financial institutions. Gold dealers and analysts said that there had been a strong move to lend gold in the market in exchange for dollars in the past week, accelerating in recent days. Large bullion-dealing banks take gold on deposit from a range of customers such as investors, central banks and other commercial banks. Although they often lend out some of that gold around the end of quarterly reporting periods in order to reduce their liabilities, the latest move is unusually dramatic and highlights the stresses in the dollar funding market, according to bankers. The banks do not, however, lend all their gold and some of it is held in accounts that preclude them for using it for trading. Traders said that the large volume of lending was one reason gold prices had struggled to achieve upward momentum, despite growing concerns over the eurozone crisis. “A a note to clients. “But it may also be a sign of distress which is supportive of gold sharp decline in lease rates over the past two days is theoretically bearish gold as holders seek to use bullion holdings to raise cash,” said James Steel, precious metals analyst at HSBC, in.”
As you know, I am somewhat of a perma-bull when it comes to gold. That is why I created the Leibovit VR Gold Letter and have been focusing a large part of my time on that project. I truly believe in gold and have for 30 years and more so in the past 8 to 10 years. Volume patterns turned a bit negative, but we’ve seen those before and the market quickly reverses. We’re overall in a bullish time frame between now and early next year , but there is some risk of a pullback here possibly into October, possibly testing or breaking the recent August 25th low of 1702. Downside risk could be as low as 1625 (34 in silver). If we blast out of here into new highs (above 1922 in gold and 44 in silver), look for 2250 and 54, respectively, by year-end.
BONDS – NEUTRAL
I remain NEUTRAL to slightly bearish on bonds here.