Stocks:
The market did manage to hold above 1100 in today’s choppy session. That’s a positive sign. The tag of 1120 is still on the table. The volatile session did manage to work off the short term overbought levels so that clears the way for a continued move up.
On the negative side sentiment levels are almost back to bullish extremes that have signaled short term tops since the rally began in March. A move to 1120 should be enough to tilt them into the “too extreme” zone.
On top of that the Nasdaq is now butting up against the 200 week moving average. I really doubt this will be penetrated on its first try. Maybe briefly intraweek but I doubt it will close the week above that level. Breadth: Another negative is the divergence on the NDX advance decline line. The leading sector is now being driven higher by fewer and fewer stocks. Not a particularly positive development. Once the quicker 5 day moving average rolls over on the NYHL it will most likely signal the start of the move down into the half cycle low. Dollar: The big news today is the swing low on the dollar chart. There now exists the possibility that the dollar has put in the daily and intermediate cycle low. If so then the dollar should start to move aggressively higher real soon. The fact that the dollar is resisting any move below that 75 support zone doesn’t bode well for a sudden collapse I think, especially since it’s now moved into the timing band for the cycle low. Do I think it has bottomed? I’m leaning that way. This is the third attempt to hold below that level that has failed. If we get a mild decline tomorrow or Thursday it might be enough to send the S&P up to the 1120 level. If I’m in the office and not out climbing I will be watching the tick for signs of panic buying. Usually it’s best to fade the market when we see that kind of buying climax because most of time it can’t be maintained. Gold: Gold now has 11 X’s in a row. Not exactly the 20 that signals extreme overbought levels but definitely enough to warrant some kind of pullback. I won’t be surprised if we see 20 X’s at the end of the second phase of this C-wave. Short term indicators are back to neutral. Gary www.garyscommonsense.blogspot.com
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