In a choppy trading week, stocks tacked on 2%, primarily on news of a pending break-through on a China/US trade agreement, and have thus gained a remarkable 17% since the bear market low (SPY 233.76) on December 26. However, the strength of this rally is not uncommon. In the two prior bear markets (2000 – 2002 and 2007 – 2009) there were 5 instances of rallies that exceed 17%, with the market continuing to make new lows – so it’s not different this time, at least not yet. It did not take long, but in one week, bullish and neutral sentiment combined (AAII) have actually exceeded the levels attained the week the market was making all time highs.
With our Upside/Downside volume numbers remaining bearish, triple bearish Momentum divergences taking hold,
and a bearish Weekly Squat on a 5 month low in range, (ex holiday weeks) the market is now ready for a significant pull-back. SPY Fib support 260.20 – 256.43 (strong). SPY near-term Fib support 266.87. Expect good bounces off these levels, and then significantly lower prices. Low day expected Feb 22/25.
The yellow metal was in corrective mode most of the week, with spot low on Thursday (1302.50) then bouncing strongly to close the week, settling 1321. The metal sits comfortably bullish above its 55 week mvg avg (1262.35). GLD Fib resistance 125.57. In line with our forecast of PM consolidation, the gold shares traded down 3%, at its worst levels, then rallied to close unchanged for the week. Longer term, we’re in the sweet spot for much higher levels for gold prices – despite Cartel paper gold manipulation - based on massive Central Bank buying, bullion tonnage moving from West to East, at the same time world production is set to decline, while world-wide mergers are intensifying. GDX Fib resistance 24.23. XAU Fib resistance 82.12 – 86.70. Look for Monthly close over 78.45 to turn Monthly trend bullish. SLV traded to near term Fib support 14.65, closing 14.82. SLV Fib resistance 15.88 (strong). SLV Fib support 14.46 (strong).
The greenback continued firm, running up against strong Fib resistance (UUP 25.92). Actual high 25.90. Then selling off, closing 25.79. Range trading is likely (UUP 25.92 – 25.31) until stocks break down.