The New Economy stocks have under-performed the Old Economy for two consecutive weeks, with the sector recording a 6 week low. With the holiday season favorable for stocks, our call for a range-bound market (SPY 267.00 – 254.45 (actual high 266.80) still stands. The powerful bullish momentum is now being worked off, which likely needs a few more weeks, takes us into the Christmas week. Reduced world-wide central bank liquidity to the tune of 1 trillion dollars is something markets don’t seem to be anticipating, will be a reality check going into 2018.
We couldn’t have been more wrong with our immediate bullish call on gold. Heavy continued paper selling drove the metal $32 lower, with spot settling 1247.60, under the 55 week mvg avg (1254.21). Maximum downside is spot 1237, as we’re within a time frame for a major cycle low. Spot 1286 is formidable resistance (GLD 122.56). The shares fell over 3% (XAU 76.93). Stiff Fib resistance 84.37!
The Dollar (UUP) traded 1% higher, with small incremental moves each day, but still within the range (bound by UUP 24.60 – 23.66). Continued sideways range trading is expected. Longer term, the Dollar remains bearish under our Weekly 89 line (24.56).
The extremely over-bought New Economy stocks mini-crashed last week, falling 3%, while the Old Economy stocks raced to new highs, tacking on 2%, creating a disparity of 5%, an amount rarely seen in the stock market. The unusual out-performance by the New Economy these many months, was the main reason we could not see a calamitous fall in stock prices. This situation may now have changed and needs to be watched closely. However, with the blow-off in the general market, powerful momentum now needs to be worked off, which can take anywhere from 3 to 5 weeks, and into the holiday season, which has traditionally been stock friendly. Therefore, stock should trade range-bound with SPY 267.00 to 253.84 as the boundary. However, with the markets giving little credence to about 1 trillion dollars in reduced liquidity likely coming down the pike in 2018, stocks may finally be in for a much rougher ride than most anticipate.
Spot fell $8, closing 1279.60, as cartel paper selling overwhelmed the gold market the first 4 days, taking GLD to the 89 line, where it held to stage a strong rally to close out the week. Gold is ready to go higher, (with GLD resistance 124.55) as the Daily ADX approaches “big move” territory with a 10 handle. The shares fell in sympathy. Bullish Momentum Divergences are now in place complementing Bullish Upside/Downside volume. The 55 week mvg avg is 1254.33, above spot 22 weeks in a row. A strong move-up in the bullion price will soon see a “life cross” as the fast 89 line crosses over the slow 89 line in a bullish configuration on the Weekly chart.
The Dollar (UUP) was little changed (24.17) and should trade in a narrow range, bound by UUP 24.60 – 23.66 for several more weeks.