Sometimes your gut is a better indicator than fundamental or technical analysis. I felt last evening that we reached an extremely bearish level in the U.S. stock market, often seen at or near market bottoms. I was looking for a washout bottom by opening hundreds of points lower and then closing higher. As it often does, the stock market decided not to accommodate me.
As noted last night, we’re entering a highly favorable seasonal period for stocks. Next week is effectively a 3-day week and often is an up week. The market was simply looking for a reason to have a good short covering rally and the announcement of who will be nominated for Secretary Treasurer was the excuse.
Ideally, another trading range for now and one final test of two key technical support areas for the DJIA could be what it takes to get me on the long side again. The DJIA held above its 2003 intra-day low of 7532 but I would’ve liked to see a test of its 2002 intra-day low of 7198. We shall see in the coming days and weeks what shakes out.
I personally almost pulled the trigger ongoing long the financials via the UYG-ETF. Here too, I hope to get another chance before years-end.
Gold had an outstanding day with major mining shares gapping up. By clearing $775, I believe a significant bottom at just under $700 has been put in. I suspect the Crimenex to attack it Monday but again, my gut says we could see a very nice rally into the New Year.
Oil is at a critical support at $50. This is where it bottomed in 2007 before launching its incredible run this year. Closing significantly below $50 IMHO eventually leads us to $40. The $40 area has been major support in 1991, 2003 and 2004. Stay tuned.
The U.S. Dollar continues to trace out a significant topping pattern. I would be aggressively short only with year-end book squaring beginning soon; it could make one final run to 90-91 before topping out.
Have a blessed weekend.
