I thought I'd post a few gold and silver stocks here and in the previous post that I think may be leaders if the PM market is ready to embark on another leg up. Most of these are in long term uptrends, the 200 DMA is ascending strongly and the 50 DMA is above the 200.
Gold is acting very strong during the recent stock market decline. Throughout most of the bull market gold has followed stocks pretty closely. I'm wondering if gold is starting to decouple from the stock market. This weeks COT report for gold is one of the most bullish I've seen in quite a while maybe ever. The commercials covered over 44,000 shorts this past week. This may be a historic high, if not then it's very close. Gold has done what is to be expected if the commercials stop selling, it's moved up. The point and figure chart is looking pretty bullish. It won't take much more strength on Monday to put another X in the 690 box and that would be a breakout. $10 more dollars would put an X in the 700 box and that would be a signal the next leg up is on! IMO. I still believe this is a correction.
I'm going to be interested in the COT report tonight to see how much of the shorts covered after the decline. However many factors suggest that the 2 month decline is over in Gold. First off gold is now making higher highs and higher lows. The RSI got to oversold and is now bouncing. Also notice the long tails. It appears buyers are coming in at these levels. Also notice at the bottom in June gold followed with 4 up days in a row. Remember Sperandeos 4 day rule? It sure looks like the trend has changed to up. BTW silver will follow if not lead gold.
I've pointed out several times that the average cycle has normally lasted 21-32 weeks. This decline started early at 19 weeks. However we have some elements in the market at this time that could bring into play my 5th year decline theory. For one when looking at the charts we see some history of this bull making double tops when the first decline has been early. Second before this decline started the NYSE already had historic short interest levels. This would suggest that a lot of people are on the same side of the boat. With the recent decline I seriously doubt that the short interest has declined, as a matter of fact it seems more reasonable that it has increased significantly. Yesterday we got a preliminary look at what could happen if everyone on the same side of the boat all of a sudden find themselves on the side that's sinking. A sharp short covering rally! If we get some strength today or possibly even tomorrow with the jobs report we could get a huge rally. That could possible bring into play the scenario that I outlined in last Sat. update. Where the bears get killed the bulls get giddy and the commercials sneak back over to the short side. That would put into place the ingredients for a top. The weekly money flows and momentum would be diverging and better still nobody but nobody would be willing to short at that point. That's how tops are made when everyone is afraid to go short and everyone can only see clear skies ahead. Obviously I have no idea if this will play out so at the moment I'm just going to stick to my systems. I'll be out again today as I have better things to do than watch the markets gyrate. See ya all tonight.
The 65 week moving average has held all corrections so far in this bull. That would be another 50 points in the S&P. That would give us a 10% correction. A 10% correction is totally normal in bull markets. There is going to be panic selling at the open today. It's probably not the best move to let your emotions take control of you right at the open. If you need to exit so you can sleep at night you might want to let some of the initial panic washout before trading. You'll probably get a better price. I'll be out today. I don't need to watch the market and make a stupid emotional decision today so I'll find something better to do.
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