SPX Monitoring purposes; Short SPX on 8/30/17 at 2457.59.
Monitoring purposes GOLD: Neutral
Long Term Trend monitor purposes: Neutral
Last Friday the volume on the SPX jumped over 30% compared to the days before suggesting short term exhaustion for last weeks rally. The volume surge usually ends the rally and a reversal in the market is not far off. The pattern forming still appears to be “Three Drives to Top” and with last Friday’s volume surge suggests the short term rally has run its course and the “Third Top” may be finishing. The FOMC meeting starts tomorrow and runs into Wednesday and could mark the time for the reversal. Short SPX on 8/30/17 at 2457.59.
On last Thursday’s report, we said, “The first McClellan oscillator reading below -200 after a prolong rally in the market suggests market has entered into a correction phase. Over the last two years when the McClellan Oscillator traded below -200 the market correction lasted around two months (give or take a few days). The McClellan Oscillator hit -246 on August 10 and suggests the correction will end around October 10 (give or take a few days). In most cases the market broke below the McClellan oscillator low reading day and suggests 2437.75 on the SPX will at least be broke. However, we do have minimum downside target near 2400 range.” The middle window above is the 21 day average of the Equity Put/Call ratio. Readings .62 and lower (current reading is .62) predict that the market is near a consolidation phase that can last several weeks. Other interesting statistics is when September option expiration week is up (last week rally) its lower two week later 87% of the time; within two months 96% of the time (credit to Sentiment trader). Therefore market still appears to be making a multi week top in this area. Through our short SPX entry was not ideal, it does appear a pull back is about to start. Short SPX on 8/30/17 at 2457.59.
The last report for the COT Commercials came in at 272K short and still bearish. We are watching GDX/GLD ratio for bullish clues and today both GDX and GDX/GLD ratio where down and showed no positive divergences. For a bullish scenario to develop we like to see Gold stocks to outperform gold and that happens when the GDX/GLD ratio is rising. With both GDX and GDX/GLD both down today, no bullish evidence was presented. There are time cycles due for a bottom later this year, ideally around November or December but could come as early as October. Still neutral for now.”