Hello Everyone,
Market Observations:
Long Term: Bear Market, Intermediate Term: Downtrend, Short-Term: could be in a small 4th wave bounce
Market Comments: Strong bear market rally with the major indexes gaining roughly +2.5% for the day. We had multiple things that suggested a rally could occur at any time:
1. On Friday the VIX actually closed down, while the market closed strongly down, generally you see a reversal the next day this this phenomenon occurs.
2. The SPX McClellan Oscillator had positive divergence with respect to the SPX, and this year all the trade lows have occurred from a divergence here.
3. There was positive divergence on the intra day 2hr, 60 min, and 30 min time frames, and bearishness was also getting a bit overdone.
Today's rally may have been the start some sort of wave 4, which could unfold in an abc structure, we'll what tomorrow brings.
Price closed below the 9 EMA on all the indexes, and needs to clear that
Bonds/Rates
: High Yield Corporate bonds rallied with the market, and so did TLT 20 year bonds. The 10 year rate was also down
Currencies: The US Dollar has continued to pullback and closed below its 9 EMA, which sets the stage for a pullback to the 20 day MA now.
Precious Metals and Mining Stocks: Precious metals has a good day, however what has continued to outperform are the mining stocks, which we pointed out last week. GDX appears to have a completed 5 wave decline, which hints that this area could be a decent swing trade opportunity
Reversion-to-the-mean systems: Nice trades for the Bear Exhaustion and QE 3.2 Exhaustion for both SPY and ES systems, we exited most but kept manual long positions.
KISS Trend Systems:
Also went back long today via the washout exhaustion/reversal.
Matt
