Gold and Silver

If anyone was riding the gold and silver train up, I think this should be your exit. As long as they close around where they are now (1:30 ET) then they will form wide range bearish engulfing patterns.

I don't necessarily have a great reason to believe this will be a major top and lead to a bear market, but at least for the intermediate term, the sentiment is too bullish on silver, gold, and the Euro and way too bearish on the US dollar. So I think there will be a substantial reversal in all those markets.

I still believe the stock market will correct from near these current levels, but there are admittedly few sentiment extremes to note.

Update

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If the market is topping it here, it would be a nice harmonic pattern. The size and time consumption of what I have noted as wave "c" above is almost the exact same as wave "a". There are several fibonacci time relations pointing to late Sept/early Oct for a turn present on the chart above as well if you look at in depth.

Assuming the market does reverse down from here, one key will be to see if the market retraces more than 61.8% of the Sept rally. I have the retracements drawn on the chart. 61.8% would be a little below 1090 as of now.

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One thing I often look at is what sectors are not confirming new rally highs, and in particular I look at the financial sector in the current market environment. You can see it is not confirming new highs on this rally the last week or so. When that has happened in the past, the market has usually been near a new correction.

If these charts mean anything, I would expect the market to fall this week.

Stocks, Silver, Gold - Topping I Think

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Sentimentrader.com just noted this today. There was a huge jump in the net short level of commercial hedgers, which are typically "smart money," on Nasdaq 100 futures this week. Looking at the chart you can see it hasn't paid to be long the market after similar past spikes.

This data fits right in with my posted outlook that the S&P 500 (or markets in general) is likely topping at the 1160 area. Also the sentiment is very bearish on the US dollar and it should be primed for a good move higher, which typically will coincide with a falling stock market in the current market environment.

On other notes, sentiment on silver is very excessively bullish, and other than long term holders, I would definitely exit silver stocks or ETF's, etc. Sentiment on gold is starting to get too bullish and should be due for a pullback soon. I may post a chart of this, but in case I don't, if you look at the price of gold divided by the euro (i.e. FXE etf) you can see that the price of gold is not at new highs relative to the Euro, even though it is against the US dollar. In the past this has been a tell that gold should move down and the US dollar up over the coming weeks. So that adds to the technical and sentiment evidence .

S&P 500 Update

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This morning the S&P 500 cash hit 1157 which is right near the 1160 area I have suggested as a topping point for this rally. It has sold off since this morning, and looks like it may form a bearish engulfing pattern today if the price closes near where it is at noon ET.

A candlestick reversal pattern right in the resistance zone would be a good confirming point that my outlook may be generally correct right now. If the market does indeed experience a pullback or correction from these levels, there will be some keys to watch for that I will lay out in a future post. Basically, if the correction does not retrace more than 61.8% of the Sept rally, in less time than it took to form, then I would lean toward another push up to higher rally highs. But we'll look at those situations as they come.

No changes right now to any trades. EUO will probably rally if the market pulls back from here. I don't know about TBT. There is now a huge bullish divergence on UNG on both weekly and daily time frames. If someone is not in this, you may want to strongly consider it here at this level. I won't be too quick to exit TZA if the market manages to get short-term oversold. I will mainly watch the hourly chart technicals for oversold conditions before exiting.

Market Update

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The chart above is a 120 minute chart of SPY which will kind of smooth some of the noise compared to the hourly chart. You can see that there is a running bearish divergence as each new push to highs recently has not been met with new MACD indicator highs.

Just overhead at 116ish is where I feel the most probably resistance zone is, though I could see it going a bit higher than that. My guess is that prices churn upwards a bit from here and then reverse rather sharply either next week or the following week.

So don't mistake.....the intermediate trend is still up. But I am thinking it won't last much longer.

2010 Trade Results So Far

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This is a screenshot of 2010 trades up to this point. At $10,000 per trade, the closed trades have so far netted a little over $2000.

2009 Trade Results

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Here is a spreadsheet of the long overdue 2009 blog trade results.

The second column from the right shows the running total of profit or loss from only the 2009 trades (assuming $10,000 devoted to each trade and no commissions). The furthest column to the right shows a running total of profits since I started the blog in 2008 (assuming $10,000 devoted to each trade and no commissions).