Short-Term Concern For Stocks & Metals
Technical Analysis Of The Week – SPX, Dollar, Gold Nat Gas
Yesterday’s price action was very bearish yet again and we are patiently waiting for a counter trend pullback to happen. While three are some good looking option plays out there I really do not want to get long until the market clears the air with a bout or three of strong selling. Remember 3:4 stocks follow the market and the odds of picking a commodity or ETF that bucks the trend is unlikely.
S&P 500 Index (SPX) (SPY) / Broad Stock Market:
We have seen a bug run up in stocks this month and things are looking a little long in the teeth . A large number of stocks are trading above their upper Bollinger band and the broad market is testing that key resistance level also. Typically when a Bollinger band is reached we see price reverse for a couple days at minimum.
While the equities market is in a new uptrend as seen by the moving averages I pullback seems imminent. The last two days has formed reversal candles and are pointing to lower prices.
Dollar Index Hourly Chart:
This next chart shows a possible bottom forming in the dollar (DXY) (UUP), pointing to a 3-8 day pullback in stocks.
Gold (GLD) Futures Hourly Chart:
Natural Gas (UNG) Hourly Chart:
Looking at the charts on several different time frames, not all shown here, technical analysis shows a pullback in stocks is highly likely. This is what we are currently positioned for.
The US dollar’s downward momentum is slowing and if it rallies, it could trigger strong selling in both stocks and commodities. Which could also mean gold and silver down sharply along with gold miners (GDX).
We have been watching natural gas for a few months and know that it has been trading inverse to what stocks do. This bodes well for a bounce in natural gas if stocks start a selloff. That being said, natural gas is trading at a key tipping point that could spark a very fast and hard drop. This knife can fall at a speed that will take a slice out of your trading account if not traded and managed properly (tiny position and use of a stop). I actually like natural gas the more it moves down and could issue a buy alert on it today or this week. I would like to see volume decline at this level showing the momentum is slowing…
Courtesy of Chris Vermeulen, www.TheGoldAndOilGuy.com