On February 5th, at 2:00 p.m. EST, the market bottomed, and the bulls have been running with the baton ever since. The Dow has climbed nearly 500 points since then, and today was the winning-est day for the bulls yet.
One graph that nicely captures what I believe is (a) a core break in the uptrend (b) the swift fall (c) the subsequent retracement, is DBB, shown below.This is a metals fund, but it neatly outlines what I think the story has been over the past few weeks. I am dubious that such a chart could push above its broken trendline anytime soon.
Although we're only talking about 19 trading days, there has been a mountain of drama packed within that short timespan. The Dow, shown below, illustrates (a) the countertrend peak (b) the swift plunge (c) the brief pause (d) the continuation of the plunge, reaching its nadir on the 5th (e) the latest launch higher, which we're in the midst of right now. I personally would be a lot more comfortable as long as we don't penetrate the levels seem on February 2nd.
The Russell 2000 also illustrates this well, although its recent rally has been more explosive. We are almost back at the "line in the sand" which, when breached before, set off the rapid slide which most of us were enjoying so much. It seems so long ago, and yet it was just six trading sessions past.
I have made no secret of my interest in shorting precious metals at the right levels. I have no position in gold now, but I did short GDX and SLV today. Provided SLV stays beneath 16.48, I am optimistic about the potential for this trade. Below is the Gold Bugs Index.
Lastly, DXD (the ultra-bear ETF on the Dow 30) has painted a nice pattern – – having pushed cleanly over its former resistance level, and subsequently having retraced back to it. I bought this late in the session today.
Since I'm on vacation (ha!) this week, I'd love my guest authors to make a point of doing some posts and give me a bit of relief. Thanks, and good night!