With an initial 1.4% bounce to start the week, (SPY high 273.44) and within a scant 46 ticks from major Fib resistance (273.90) stocks have tacked on 16% since the bear market low (SPY 233.76), and has collided — and stopped — at the 200 day mvg avg. As pointed out, this is not uncommon for stocks to show extreme strength from a bear market low. In the 2007 – 2009 bear market, from close to close, stocks rallied over 24% from the low. And then went on to make new lows, given the benefit of time. However, what may be different, stocks have exhibited staying power, with the New Economy, compared to the Old Economy, registering 15 week highs. So, while we’re still bearish long term, (our Upside/Downside Volume studies remain bearish and Momentum has started turning negative, as well as Market Breadth) we’re likely in an interlude period, which should last several more weeks before new lows are seen. Despite the fact that every major sector of the economy has lowered forward guidance, what’s needed for the next major leg down, and new lows, is an extreme build-up in bullish sentiment, as stocks meander through this choppy period over the next 6 – 8 weeks. An important low point is due around March 22. Fib Support SPY 258.52 – 253.63 (strong).
Spot gold never traded above last weeks close (1317.50) trading in a $14 range for the week (1316.20 – 1302.60) settling 1313.50. It’s likely with our original price objectives having been met, the PM’s will go through several weeks of consolidation. Maximum spot price on this move 1349. The gold shares, (XAU) while flat on the week, continue to lead the metal registering a 26 week high, despite a firm Dollar. XAU resistance 82.12 – 86.70. Look for a Monthly close over 78.45 to turn Monthly trend bullish. GLD Fib res 125.57. GLD Fib sup 121.81. Silver fell 9 cents, finding good support on the pullback. SLV Fib sup 14.46. Much longer term, as the precious metal bull goes into “over-drive” look for a Monthly gold close over 1378 to trade to 1700, and on the first monetary reset, trade to 2300.
Dollar action fooled us, reversing the prior weeks decline and bouncing back above our key trend 89 lines.
Fib res UUP 25.92 (strong). Range trading UUP 25.92 – 25.31 is likely scenario while stocks don’t break down.