SPX Monitoring purposes; Short SPX on 8/30/17 at 2457.59
Monitoring purposes GOLD: Neutral
Long Term Trend monitor purposes: Neutral
The pattern forming on the hourly chart appears to be a Head and Shoulders top where the Head is last Monday, Tuesday and Wednesday trading. We at one point were concluding that a potential “Three Drives to Top” was forming on the hourly chart. But with today’s decline low testing the gap of September 12 on equal volume suggests the hourly “Head and Shoulders top” formation is the more likely scenario. Market could trade sideways a couple more days to form the “Right Shoulder”. This potential hourly “Head and Shoulders Top” has a downside target to the September 11 gap and could find minor support there. The bigger “Three Drives to Top” that started back in June has a downside objective to 2400 on the SPX and our intermediate term target. The McClellan Oscillator hit -246 on August 10, suggesting a consolidation on average that could last two months or longer. Short SPX on 8/30/17 at 2457.59.
More evidence for a top is forming. The one month volatility (VIX) compared to three month volatility (VXV) is at levels seen near consolidation or highs for the SPY. The inverse VIX/VXZ ratio also shows the same resolute (bottom window). Therefore at best the market could expect is to trade sideways or worst produce a decline. The “Three Drives to Top” we have discussed on previous reports appears still in play. The current setup could lead to a potential pull back that could reach 2400 range on the SPX which is near 4%. The McClellan oscillator closed today near +67; a close below “0” would be another bearish sign. Short SPX on 8/30/17 at 2457.59.
The last report for the COT Commercials came in at 253K short and the previous week at 272K short both of which are bearish. The middle window above is the GDX/GLD ratio. It’s a bullish condition for both gold stocks and gold for this ratio to outperform both GLD and GDX. The chart above compares today’s close with the July high and both GDX and GLD is above their July high and GDX/GLD ratio is not, showing that the GDX/GLD ratio is weaker than both GDX and GLD. When this condition has happen in the past, usually the GDX and GLD rallies fail. It appears market is not setup for a continue rally here. There are cycles for a low due later this year and December is the best chose for now. Staying neutral for now.