From the high the previous week (SPY 281.87), stocks added another fractional gain (282.38), to set new recovery highs, breaking through Fib resistance, to extend the gains to 20%, in a stunning 10 week rally that began December 26. In no sign of a let-up, stocks were led higher by the New Economy sector which recorded a 6 month high vs the Old Economy. However, while stocks were hitting new recovery highs, in a troubling sign for the economy, the DJ Transportation Index, was going through a near record 11 consecutive losses, the longest in 47 years. With a high day projected for March 15/18, another mild sell-off is likely with near term targets SPY 275.66 – 273.97, followed by another rally to challenge the highs. As long as the New Economy sector is out-performing, we expect only relatively modest declines for the market, despite our Upside/Downside Volume and Momentum studies remaining bearish. Taking another look at the Weekly chart, you can make the case that the 10 week rally, brought stocks to the neckline, leaving little room for further gains, in an enormous H&S top formation.
The metal continues to trade in choppy fashion, getting slammed early in the week — finding support spot 1290 — and rallying to close out the week 1302. More sideways trading is likely for a few more weeks, with rallies aborted 1320 – 1330 and strong support spot 1281 – 1271. A strong Weekly close over 1360 (mid May) will indicate the bull move has begun with 1400, and higher, in sight. GLD Fib support 119.62. GLD Fib resistance 123.99. SLV Fib support 13.90. SLV Fib resistance 14.83. The gold shares closed flat, after trading lower, but continued to show relative out-performance vs the metal. Interest has returned to the sector with a 3 month high in volume. GDX Fib resistance 23.21. Look for Monthly close over XAU 78.45 to turn trend bullish.
The greenback fell 1%, (UUP 25.80) after challenging recent high (UUP 26.12) and appear ready to break below 25.57, and close under our 89 line trendlines.