Marks VRTrader Silver Newletter covers Stock, TSE Stocks, Bonds, Gold, Base Metals, Uranium, Oil and the US Dollar. For a trial Subscription of The VR Silver Newsletter CLICK HERE
STOCKS – ACTION ALERT –
It was ‘Turnaround Tuesday’ and the market showed lived up to its reputation for volatility. Today is ‘Weird Wally Wednesday’, the Wednesday of the week prior to options expiration (third Friday of the month) which also usually hosts some volatility. The ‘usual’ pattern would be to witness a retracement part of this week to be followed by a strong recovery into next week’s options expiration.
Meanwhile, the sell-off was attributed to disappointing news from Dow components McDonald’s and 3M, another decline in the Dubai stock market, a downgrade of Greece’s debt, and credit concerns about the U.S. and U.K trade deficits, sent the risk averse fleeing from equities and commodities and towards the dollar and US Treasuries. (See all the stories in the news section.) For the session, the Dow was off 104.14 at 10285.97, the S&P 500 was off 11.92 at 1091.93, and the Nasdaq Composite was off 16.62 at 2172.99. Volume increased over Monday and breadth was weak.
The S&P 500 broke but managed to hold support at the 1080 level. Negative Volume Reversals ™ have been formed and the market certainly looks heavy. Cyclically, however, my work had a ‘cycle change point’ due on or about December 9 (today) and with all the ‘bad news’ yesterday we could very well see the market recover.
Gold, too, continued lower, but I saw the current sell-off coming and advised clients ahead of time (actually a few days early) in our VR Gold Letter.
For the most part, I am sitting on the sidelines with some modest positions for Platinum subscribers with one short recommendation in Gold via an inverse ETF which I’m inclined to sell and look to take profits here or on any further short-term weakness.
The culprit is the U.S. Dollar which has suddenly become the bastion of safety for unsafe economic world whose strength has now put pressure on stocks and Gold. Do I believe it will last? No. Do I believe we’ll see new Dollar lows? Yes. The rally in the Dollar is a mirage. The trend in Gold is unmistakenly higher (except for this current correction). The trend of the stock market is still overall higher if you look at weekly and especially monthly charts of the major indices, but we cannot dismiss the risk of a correction and following my Volume Reversals ™ you have to be cautious here until positive volume appears and/or we manage to break out to new highs. As I mentioned yesterday, recent strength in the leading Dow Transportation Average cannot be ignored.
We have many year-end cross currents at work from tax loss selling to investment managers seeking to ‘ring the register’ and get paid awaiting the New Year to implement investment strategies.
At the same time I am not Pollyanna. I realize that the market could have really topped or is about to and a more serious correction lies ahead – perhaps a couple thosand points to the downside in the Dow Industrials. There are just some times (like now) when keeping a low profile makes sense. You don’t have to be invested in them market all the time and this may be one of those moments.
I am looking to have a restful and quiet holiday season and not looking to take on any unnecessary stress. Until my 2010 Annual Forecast Model is completed, I hope to do as I’ve just said – be patient!
Energy (XLE -1.7%) and materials (XLB -1.6%) were among the worst performers on the day as commodities got hit by the rising Dollar. Each declined on an increase in volume.
All nine market sectors are down, though Utilities (XLU) held up the best, yet again, falling just 0.4%.
The gold miners ETF (GDX -4.04%) continued its ugly slide on solid volume as gold (GLD -1.91%) and silver (SLV -2.92%) continue to correct.
This push lower in equities may be short lived, however, as money flowed into high yield bonds (HYG +0.12%) and semiconductors as the PHLX Semiconductor Index gained 0.07% in the face of obvious negativity yesterday.
These bright spots may or may not be enough to hold up the broader market, however. Watch the November 27 low on many of the charts. That is the line in the sand. If that gives way, a larger correction is unfolding.
Looking at the S&P 500’s MACD and RSI, it is establishing yet more negative technical divergences. As long as the market sets higher highs and higher lows, which it has continued to do, these divergences can be ignored. But they are early warning systems and could signal bad things ahead if support is broken. Look for support at the recent lows just above 1080, 50 day moving average of 1080, and at the bigger lows of 1020 and 1030.
Marks VRTrader Silver Newletter covers Stock, TSE Stocks, Bonds, Gold, Base Metals, Uranium, Oil and the US Dollar.
More kudos – Mark Leibovit was named the #1 Intermediate Market Timer for the 10 year period ending in 2007; the #1 Intermediate Market Timer for the 3 year period ending in 2007; the #1 Intermediate Market Timer for the 8 year period ending in 2007; and the #8 Intermediate Market Timer for the 5 year period ending in 2007. NO OTHER ANALYST SURVEYED APPEARED IN ALL FOUR CATEGORIES FOR INTERMEDIATE MARKET TIMING AS PUBLISHED IN TIMER DIGEST JANUARY 28, 2008!
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