Tonight’s report is going to be brief as it looks like the market is still trying to work its way down into the half cycle low. I’ll get the spreadsheets done later tonight and resend this report with them attached. I’ve been out climbing all day and right now I’m headed out to Ruby Tuesday’s to see how much damage I can do to their salad bar J
There were two semi important developments on the COT spreadsheets this week. Gold hit the most bearish commercial position of the entire bull market. Commercials are selling gold like there’s no tomorrow. If we were on week 5-6 of the intermediate cycle I wouldn’t be all that concerned and would actually look at that huge short position as potential short covering fuel. However week 21 is a whole different ballgame. The gold market is in dire need of a breather and the commercials are putting tremendous selling pressure on the yellow metal at the exact time it is most vulnerable to a sharp correction.
The other development is in the Nasdaq 100 contracts. It reached the most bearish level since 10/16/07. I don’t pay a lot of attention to the index COT’s anymore but the last five times the Nasdaq contracts hit this kind of bearish levels it was soon followed by an intermediate decline. Again if we were 5 weeks into an intermediate cycle and there had been no negative money flows I probably wouldn’t look twice at this. But that’s not the case at this point. We are 21 weeks into the cycle and have huge selling on strength days showing up. Folks it’s getting dangerous on the long side. That of course doesn’t mean one should go out and short the market willy nilly, but it’s probably a good time to tighten stops on long positions or just go to cash until we see something that looks like an intermediate term correction.
Stocks:
If I had to guess I would say we drift down this week possibly putting in the half cycle low on the jobs numbers Friday. The fact that we saw another -90 million of selling on strength isn’t terribly positive for the markets. Big money is using any rally to unload stocks.
If we do get the half cycle low Thursday night or Friday morning I still expect the bounce to be a failure. By that I mean it shouldn’t be able to move to new highs and should soon roll over to lower lows as we work our way down into an intermediate low later next month or even into early Jan.
Until we get a swing low the move into the half cycle bottom is still intact. Dollar: As usual the dollar is key. It’s now in the process of trying to break back through the 75 resistance level. When it does the move down in stocks and commodities should start to accelerate. Gold: The swing high is still intact. The odds remain high that gold has put in the cycle top. A move back below the 10 DMA would probably seal the deal. Short term indicators are still floating around in the neutral zone. Gary www.garyscommonsense.blogspot.com
Index COT spreadsheet
Commodity COT spreadsheet
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