"A TEACHABLE MOMENT"
Of course I say this mockingly, can there be any doubt?
For those who have read here regularly, you will be familiar with a situation I had previously talked about where we would need a catalyst to start this decline. I actually thought it would be the health care bill, but it turned out to be my good friend Barry and his bank crackdown. One of the limitations of the PPT is volume. They cannot play their futures buy program games when the volume gets really high on the sell side by large institutions. These institutions often sell at 20 and 40 or 50 day lows. When you get a rush to the exits like we have had here, the PPT cannot stop these types of moves. They have been able to hold this market up for a remarkably long period of time. Quite frankly, I have never seen anything like this in my trading career.
Do not underestimate their desire to support this move now that it has started. We will have to watch carefully as we get into a support area, how the volume is. If volume stays high, they might be in trouble. If it calms back down, they will able to easily move this back up. The problem with these running market airpocket situations is, they always break out of the blue, and really have no support points. This is why if you look back at charts for these types of patterns with very small ranges just moving up at a steady pace with no retracements, that the declines are sharp and quick. Crude Oil comes to memory as a recent example of this in it's move to 140 and subsequent collapse.
Here we have our weekly SP 500 chart with a few things on it. The vertical lines are cycles where we have had consistent action at these turning points as you can see. The next panel is Larry Williams WillGo Index, both short and long term. You can see the Long Term ( red ) is indicating a decline to begin about now. The last graph is the Bradley Model which also calls for a decline to begin about now. The middle panel which is one of my hybrid COT indexes so far is not indicating any buying on this dip. You can see the last two major lows featured a textbook buy spike in this index. If we see that during this decline at a point where we have not broken the weekly uptrend, and we will have a nice buy setup. This is one of the main things I will be watching on this decline to tell me if we are going back up, or just straight down.
I see two scenarios, straight down to take out the March lows, or a bounce to new highs maybe in the 1235 area, then a move down under the march lows. Both feature an eventual large move back down. However, those are just guesses and I will not trade off them. For now we have to be in sell any minor rallies mode.
Of course the metals markets have been clobberred, there was no other way they could go. The setup for a short was the best I had ever seen in my career and I stated as much in here. The worst development that could possibly be happening in GOLD is evident on this chart below, NO COMMERCIAL BUYING ON THIS DECLINE
It will be important to watch to see if this continues. The fact that they have not covered any of their shorts so far is a very ominous sign for this market. If you were holding Gold buying into this nonsense and hype you have nobody to blame but yourself. This was the most obvious sham I have ever seen in my life. It is true, smart people were wrong. How can this be, they have all this education and knowledge, and sound ecnomic views? Simple, what they focus on does not drive market prices. The long term trend is still up but I think in a couple of weeks that is likely not to be the case. Technically it is in a buy zone by one of my approaches, so I am looking initially for a short term buy down here, then longer term, mortgage the ranch on the short side. If we get a move down that turns everything down, then a bounce, this will be the million dollar trade for this year. Also keep in mind the tight correlation between GOLD and stocks, they are moving together. This makes no sense, but it is what it is and needs to be honored until it decouples. If you are not bullish or bearish on both, one of your views is likely wrong.