A wild week of volatility characterized the market, with new all time highs in both the Old and New Economy sectors registered on January 2nd, followed by nearly a 2% sell-off — based on the overnight low — on news of the drone killing of a top Iranian general, followed by a market recovery, which netted out to a fractional decline on the week. The Fed’s QE to infinity mode is behind the stock rally, but it can’t go on forever, and is masking the weakness in market Breadth, which recorded 13 week lows in NYSE 52 week highs. Over the next 10 days, the SPY should be bound by 325.32 to 318.59, before a deeper correction sets in, taking SPY to 312.66 – 309.67. New highs are still likely, based on the performance of the New Economy sector, which has led the market up until now.
Gold gained $41.50, closing 1552.80, a multi-year closing high. The XAU closed at a 40 month high, (105.41) but lagged the metal. With bullion having reached, for the second time, the breakdown point of resistance (1555) in April 2013, it’s likely some additional time may be needed for the market to clear, in light of the lack of leadership in the shares last week. Spot gold target 1670. Spot gold important support 1517. GLD support 142.54, SLV support 16.07, GDX support 28.04, GDXJ support 39.57, SIL support 30.70.
The greenback closed unchanged (UUP 26.09) for the week, after gapping lower, not quite reaching major Fib support UUP 25.81 (low 25.93). It will take a Weekly Close over 26.74 to turn our trends back up.