The bounce-back rally discussed last week proceeded on schedule with stocks gaining 5.5%, with the New Economy stocks also keeping pace. For the bearish case, Upside Volume did not keep up with the price gain, and near-term bearishness showed up in our volume studies. Longer term, this is extremely bearish for stocks, with the greatest decline still ahead of us. Further supporting the bears is the breakdown of LQD, which is in the process of completing the right shoulder of a bearish H&S topping formation. However, in the short term, for the bullish case, Daily Momentum was the strongest in nearly 10 months, and time is now needed to work this off. Additionally, an improvement in Market Breadth should keep stocks range-bound. This will surely test the patience of the bears. An important cycle high is due around December 11, with choppy, volatile trading, within the recent range, the likeliest scenario until the end of year. SPY Fib resistance 277.12 -286.64 (strong).
The metal made two stabs to get over spot 1230 and was rejected by heavy COMEX paper selling and a firm Dollar near the highs, settling virtually unchanged from the prior week (1222.50). This makes 3 weeks in a row around 1222. We’re still looking for a strong close over spot 1233 to make a run to 1310. The XAU lost 1%, but formed a Bullish Weekly Squat on the smallest range in 6 weeks. Upside/Downside Volume was bullish, and negative Momentum continues to dissipate. Look for an XAU close over 68.54 to start a bull run. The 55 week mvg avg for spot gold is 1257.04.
The greenback remained firm, hovering near yearly highs, with UUP closing 25.92. Strong Fib resistance 26.04. Fib support 24.68 – 24.32 (strong).