ETFS

Sp500 seems like it is ready for a New Panic Cycle

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The wild volatility over the last 2 weeks I think had a lot of people probably feeling like they just entered the spin cycle in a washing machine.  The market was showing huge signs of strength and then equally huge signs of weakness back and forth.  In the final analysis I think we can basically say that the last two weeks the market has basically traded flat.

But a market that trades flat still means something.  It means the market has created sideways cause ( or energy) for the next big move.  It looks more and more like that next move is going to be down in a new panic cycle. 

I can give you plenty of reasons why the market could still get a bounce to the 1100 to 1150 range but so far it has already tried to bounce above the 1100 and has failed.  It may try again (especially considering the extremely heavy oversold closing Arms value we has on 6/4/2010) but my instinct tells me it will just engage a new panic cycle starting tomorrow.

If you look at the 2/10/2009 date you will see a similar market basing period that looks quite similar to the period we are in now.  Also notable is that on that 2/10/2009 there was a similar very high closing ARMS value but not nearly as high as 6/4/2010.

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I have a bad feeling that the Gold Price will get hit tomorrow

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The gold price is in a very touchy situation right now based on the weekly chart and I have a bad feeling right now that gold will get clobbered tomorrow badly on the employment report.  The daily chart of the SPDR Gold Trust (ETF) shows a recent up move retracement on very light volume.

The monthly price swings are also showing me that we have a sell signal based on volume on the GLD.

There is also a very ominous looking weekly price divergence that is developing which could turn into a confirmed sell signal in the weeks ahead.  I think people forget that gold can be extremely volatile to the down side.  It has had an superb run since the 2001 lows, but like any market nothing goes up in a straight line.  Markets need to build sideways cause after huge spikes upward as a foundation point for the next leg up.

If in the weeks ahead the SPDR Gold Trust (ETF) breaks below the 98 level then it is going to put a serious 1st nail in the coffin of gold for perhaps 2 to 3 years and we could see a 50% decline in the gold price from the all time highs.

This is exactly what happened in the mid 1970’s.  Gold went from 200 down to 100   but then after 100 it shot up to 850 for the final blow off run.   So if we break down to 650 then it could very well be the stopping point before another huge run to 5,500 gold price.  So the question is how many in the gold crowd want to sit through a 50% 2 year decline in the gold price ?  A 2 year 50% decline can be a very painful and emotional burden and cause one to doubt the entire premise of the bull market in gold. 

But a 50% decline would setup up massive cause and pivot for a blow off run to 5000 5 years from now.

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SPY does a Bullish Spring of the May 6 2010 Mini Crash Swing Low

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The SPDR S&P 500 ETF today accomplished a bullish spring of the May 6, 2010 mini crash swing low during the last 2 hours of trading today.  A bullish spring is when volume is not sufficiently heavy enough relative to previous swings and closing price is above those previous swings.

It was a close call today because the way the market was set up (including macd histogram, RSI and some other indicators) it really needed to get a good reversal going again otherwise it would have put the market at risk of a very severe plunge below May 6, 2010 support.  It just goes to show how the market is capable of putting everything on the line with only a few hours left to finally give the reversal signal.  The action today had the flavor of capitulation and leaves me much more confident that a true reversal is at hand.  How high the bounce is remains an open question however.

Also helping the bounce case is the US Dollar Index.  It looks like it double topped today on the daily chart and should get some type of move back down to its own 50 day moving average.  Perhaps that will support equities for the next 5 to 10 trading days.

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This could be a very important Market Timing Chart and Signal on the QQQQ

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I just loaded up a longer term chart of the QQQQ Nasdaq tracking ETF (PowerShares QQQ Trust, Series 1) and I found a couple of potentially important clues.  The clue has to do with the current level the QQQQ is at right now and where it is situated relative to two other very important peaks.  It also has to do with the volume level at those peaks and the current volume at present day.

Nine times out of ten (my own approximation) whenever you have a stock or index reach a previous key peak level in the market, there is usually some type of retracement for the simple reason that previous holders want to get their money back.  Another reason is because technicians are also watching these levels and use it as an excuse to sell.  And a final reason is the quality of the volume test because in volume analysis you need volume that is within 3% or greater of the previous highs volume for there to be an eventual successful breakout from that level.

The chart of the QQQQ as shown below indicates that it is only .54% away from testing a very key previous resistance level both in terms of price and volume.

qqqq20100414

Basically we are within ‘inches’ of this key level.  The key level on the QQQQ is 50.18.  This is a key level because you can see from the chart the two previous key price peaks were generated at this level and they were relatively sharp peaks.

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