After 4 days of the lightest trading in over a year, stocks tacked on another small fraction, closing at all-time highs, confirmed by the New Economy sector which closed at a record high on Thursday, before falling back on Friday. However, the dramatic shrinkage in market Breadth was the real takeaway, and should pave the way, finally, for a decent correction. With the Fed still injecting massive amounts of new liquidity in the repo markets, this rally is likely far from over. However, the gains will be harder to come by, as stocks will have to compete with higher yields in the bond market. High yield rates closed at the highest level since October 2017, suggesting a strong dose of inflation is around the corner, and rates may have a lot further to go, with the ADX on HYG only in the mid 20′s, — not a great environment for stocks once the money spigot gets turned off. HYG support 87.41. SPY support 312.66, 309.67.
Gold rallied to an 8 week closing high (1511.30) up 32.40 for the holiday week, aided by a sharply falling Dollar. The weak Dollar had a salutary effect on the metal and the miners which negated a Bearish Squat and rallied a stunning 8%. The shares in typical bull market fashion, led the metal, recording another multi-year high. GLD, SLV, GDX, GDXJ, and SIL have now cleared their breakout levels, and after a consolidation, are poised to go sharply higher. GLD support 138.94, SLV support 16.05, GDX support 27.68, GDXJ support 38.75, SIL support 30.69.
Without any fanfare, and muted silence by the media — despite higher interest rates — the Dollar (UUP) gapped under our trendlines, breaking support 26.30, leaving a 5 month island, and heading for important Fib suppoort 25.81. It will take a Weekly close over UUP 26.77 to turn trends back up.