friday update

Posted on January 14, 2011 by tony caldaro

SHORT TERM: market extends uptrend, DOW +55

Overnight the Asian markets were mixed. Europe opened lower but closed mixed as well. US index futures were lower overnight. At 8:30 the CPI was reported positive: +0.5% vs +0.1%, as was Retail sales: +0.6% vs +0.8%. Then at 9:15 Industrial production was reported expanding: +0.8% vs +0.4%, along with Capacity Utilization: 76.0% vs 75.2%. The market opened lower at SPX 1282 and dipped to 1281 in the opening minutes. It had closed at SPX 1284 yesterday. Soon after the open the market started to rally. At 10:00 Consumer sentiment was reported lower: 72.7 vs 74.5, but Business inventories were reported positive: +0.2% vs +0.7%. The rally continued and around 11:00 the SPX broke through the uptrend high at 1287. For the rest of the day the market continued to work its way higher. Nearing the close the SPX hit 1293, slipping above the 1291 OEW pivot, and closed there.

For the day the SPX/DOW were +0.60%, and the NDX/NAZ were +0.75%. Bonds lost 6 ticks, Crude gained 25 cents, Gold dropped $12.00, and the USD was lower. Support for the SPX notches up to 1291 and then 1261, with resistance now at 1303 and then 1313. Short term momentum continued to rise from yesterday’s slightly oversold condition and ended the day overbought. Last night the FED reported the Monetary base is expanding again. Today the WLEI was reported higher: 53.7% vs 53.4%. Monday is a holiday in the States.

The market started to rally today ahead of the holiday on monday. The SPX cleared the uptrend high early and continued higher into the OEW 1291 range. The close above this pivot was a good sign heading into next week. Short term OEW charts remain positive with support now at around SPX 1282. With three OEW pivots 1291, 1303 and 1313, one right after the other. This will likely provide a lot of resistance going forward. Nevertheless, the market continues to work its way higher and is in our targeted range for this uptrend, Major wave 1: https://caldaro.wordpress.com/2010/09/26/spx-bull-market-projection/. Enjoy the weekend!

MEDIUM TERM: uptrend high SPX 1293

LONG TERM: bull market

CHARTS: http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID1606987

About tony caldaro

Investor
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9 Responses to friday update

  1. zimbabweanimike says:
    January 14, 2011 at 6:18 pm

    With this little pullback in GLD/GDX/SLV I was doing some chart work and calculations on avg duration for corrections over the last 5 years, avg pullbacks,etc. with the following results. Who knows if somethings different this time but the pullbacks have been fairly consistent. Looks like we may have some more pullback to come but are closer to bottom than top.

    GLD: Average correction last about 2 months and we shouldn’t be surprised to see the “masses” follow their playbooks and sell PM’s in January/February. Corrections tended to end first week of February
    Average pullback was -16%.
    2006 correction -19% and lasted 5 months
    2008 correction -27% and lasted 7 months
    2009 corrections -12% (2 months) and -9%(2.5months)
    Tended to correct to 150 day MA which is now 128.8 but pullback to bottom of 5 year channel could take it to 116

    GDX as a proxy for the miners: Average correction also about 2 months. Capitulation tended to be on days when volume was >20million shares.
    Average correction tended to be -20%. Peak price on 12/7/10 was 63.8 so 20% correction takes GDX target to 52ish or 5% lower from this mornings open

    Notes from an options service I use on GDX/GLD on institutional options trades happening:

    “Sticking to traditional interpretation, the target of the GLD pattern’s top would then be roughly $1,310, the support from early October. But that would be only the first lower low since July, when the most recent run started around $1,160.

    The long gold trade has been a notable part of the portfolios of some big players, including John Paulson (who is apparently set to earn another $1 billion or $2 billion for 2010) and the Harvard endowment. On the other side of the coin is George Soros, who has said that the run in gold may be the ultimate bubble–but was quick to note that it could go on for quite some time before bursting.

    Some large option volume speaks to the fact that some institutional players may also be positioning for a pullback. Last week a trader picked up 25,000 of the GDX June 46 puts while the fund traded at $58.31, as we noted on InsideOptions.

    Puts that far out of the money are unlikely to be hedging on a long position, so it appears that the trader is looking for the miners to potentially lose more than 20 percent of their value in the coming months. And the correlation is 92 percent between the GDX (teal line on chart) and the GLD (magenta line), so that doesn’t bode well for the price of the metal itself.

    Now, put buying in these big ETFs can mean many things. It can be hedging against shares or other long gold positions. It can be traded against other positions in the underlying stock, at least in the case of the GDX. And sometimes it can be just plain downside puts–straight bets that gold will fall and take the miners with it. That is especially true when volatilities are near 52-week lows and such bets are relatively cheap.

    I will be the first to point out that being too early to bet against an asset can be just as expensive as being wrong. But the action is interesting, especially as the equity markets plow to new highs as gold starts to slip. ”

    SLV: This ones a wild palomino: Corrections tend to last same as GLD about 1.5 to 2 months and 20% declines not surprisingly.
    Peak price in December 2010 with a 20% correction leads to a 24-25 target for SLV.

    I suspect this could be a normal correction but with sentiment so bearish I wonder if the bears will lean on the short side hoping to break things and get smashed given all the debt out there. Time will tell but it seems the gold/silver markets is the first part of the commodity complex to show its correction tendencies as gold and softs really haven’t pulled back much.

    Just another opportunity to buy cheap assets

    » Thanks to the reader who compiled the data .

    A sniplet from Fleckers ask. Stay warm all.
    fwiw im not chocolate to the racist out there.. And my tans faded…

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  2. x0521 says:
    January 14, 2011 at 6:18 pm

    Hi Tony, Thanks for the response re: r.earths. Been watching MCP also. I may nibble on a large sell-off. Perhaps, when we get an overall correction they will toss this aside. Reviewed a few of your charts. Wanted to confirm my understanding: $BSE looks to have a bit more downside toward 18000 (4-5% add’l drop)-retest Sept low; Gold has dropped approx 5% and appears we may have another 5% to the downside over the next month or so toward 1290+/-25 target zone; GG has tested to 40.50 area, next stop 38-39 if it breaks; oil continues to refuse to decline, however, I assume we may get a revisit to 75-80 when the SPX corrects? thanks

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