The above chart is that of the SP 500, and what I think is potentially setting up as a great buying opportunity. We are not there yet, but there are a few very positive things going on. First, the Advance/Decline line has held up remarkably well. It still has a reading higher than what it had much earlier in the year, while stock prices are sharply lower. This is a significant divergence. The Bond market is also as everyone knows very strong. Strong bonds into stock declines are very bullish situations. Money tends to flow to the higher return potential, so when rates are very low like they are now, generally money migrates to stocks and vice versa.
We also have the typical seasonal low time approaching. In addition to that, that goofy chart I showed a couple of months back is also calling for a low this week. We also have the 3rd year presidential cylce influence, which is very bullish. One could argue that is generally caused by lower rates to help re-election campaigns. This is most likely the cause, and the rates are already so low how much lower could they go? However, low rates are in place and that is all that matters.
In the near term, we have significant distribution going on, so I don't think the low is here yet. The sell the VIX trade will be in place if this week closes down a couple hundred Dow points. That is another buy signal for stocks. I also like the fact that the indexes are holding up much better than so many other markets. We are getting the late day declines, which is bearish in the near term. However, we are not getting the wash outs I had expected. In terms of full disclosure, I did exit all of my shorts in the middle of the day session on Friday. We ran into another terrible situation with one of my animals, and I was just too upset about it to trade, so I wanted to be flat. I am sure this cost me some lost profits, but you have to have your head clear to trade. It was a miracle that I made decent money this past month with all of the problems I have had with my beloved dogs.
In summary, we have a big buying opp coming but I don't believe it is here quite yet. The next chart is where I do think we have an opportunity right here, the Ten Year Notes.
I have been talking about this for a few weeks now. I think it is clear that this is the weaker of the two markets, with the other one being the 30 Year Bonds. We have that trap pattern right at the highs that I pointed out a few days ago, and now we have moved down right into a pretty clear trendline from below. A break below this could result in a nice decline, one worth trying to play. I also find it somewhat bearish that with the late Friday market crash, the two interest rate markets did not react up that much. One thing of course that could happen here is that if we have a big stock rollover, it could create a little more of the flight to quality trade we typically see, and these prices will rise. However, in the last few days we have seen some pretty significant equity drops without much upside movement here.
Here we once again have the worlds favorite market, Gold. This market appears now to be setup pretty well on the weekly chart for a rally. I do not have any buy signals on the daily chart, in fact a bounce looks more like a sell at this point. However, normally the larger moves come in conjunction with a higher time frame pattern. I do think the game has ended here but that does not mean we cannot make one last run before going back down to $500 or less. This is where we are going here based on the studies I referenced the other day. Do the math on what an 86% retracement of the up move would be. That is the average for hyperbolic commodity moves.
In the interim though, we have a strong uptrend that is hanging on by a thread, and quite a bit of commercial buying going on, with the seasonal also saying upward. I think the Gold Bugs are going to be handed one last hope of this rally staying alive for a bit longer. How to trade this on a short term basis is at times different than the bigger picture. Silver is of course the much weaker market, so that is where sells if they are entered, should be done.
Here is Crude Oil, a market with mixed signals. First we have a downtrend in price, and also a seasonal tendency for a decline. This is pretty bearish. We do have the commercials buying this decline steadily. This is not that unusual and not a reason to buy stand alone. However, what has caught my interest here is the accumulation going on with the POIV index. Notice how much stronger the purple line has been than the price. I think this is going to trigger a rally here at some point, but I am not sure when.
Sadly, I must announce the passing of the greatest rescue success we have ever had. My oldest dog and longest living rescue at 6 years from the time we got him, Jackson has passed away. The picture below is how he looked when we got him 6 years ago. Although you cannot tell from the picture, he was 40 lbs underweight at the time we got him, and had heartworm. His prior owners could not afford to treat it so they just took him to a shelter. What a beautiful soul he was. He was such an incredible combination of all the traits a Saint Bernard should have, and I can only hope we are lucky enough to meet back up with him again in some other stage of life. Universal Studios was in line to get him for movies because of how handsome he was, but fortunately for us we got the folks at the rescue to let us have him. What an incredible blessing it turned out to be.
We had been living on borrowed time with him as he had some ailments that should have taken him from us long ago. Utlimately they were just too much for him. I cannot express the love and thanks I have to whatever cosmic power put him with us for the time we had with him. In a world where the standard view is how lucky dogs are to be rescued, I think it is me that is lucky to have them.
Farewell sweet Jackson, thank you for allowing us to share your life with you. I pledge to save as many of your brothers and sisters as I can before my time is done.