Slope of Hope Blog Posts
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Another week marked by some sector rotation juiced by a strengthening dollar. Here's a graph of the major 24 sectors (CLICK!):
Travel and Leisure's oomph was due to the strength in Airlines, the highest performing industry. Here's a chart of the the Total Stock Market (CLICK!)
The last rally that formed the top of the much hyped head in a potential H&S pattern developed over a period of 8 weeks prior to correcting. We've just completed the 8th week of consecutive, positive weekly close on the broad market. With earnings season upon us, watching how the market responds to news will be important. The volume over this last 8 weeks has been lower than the previous run up to the last high as well as volume from the same time last year. While I'm not making any predictions, I would surmise that given this run up combined with the overall overbought nature of the market, there is vulnerability to negative news. Let's also take a look at the sectors that have the highest short interest (data courtesy of FINVIZ):
As is usual, I've created a chartbook for you. You can find it HERE
As our proxy for gold, let's have a look at the big picture of the SPDR Gold Shares ETF (NYSE: GLD). As we enter the final hour of the week, let's notice that the GLD appears to have held lows in the 128.80 area against its July-October up trendline, which preserves its near term uptrend. That said, however, the "Island (Cluster) Top" that was put in during the Oct 14-Oct 19 timeframe remains valid and represents a very powerful negative technical influence on the GLD.
Unless or until the gap area between 1.3150 and 1.3280 is filled, the near-term technical health of the GLD must be questioned. Furthermore, inability of the GLD to close the down-gap before the price structure breaks the July-Oct up trendline at 128.80/70 could have a devastating impact on the heretofore bullish trend- and will project GLD prices into the 123.00-121.00 target zone.
Much might depend on the outcome of the G-20 meeting, which likley will have a meaningful impact on the direction and the value of the US Dollar. If the Dollar responds positively to the G-20 meeting, then the GLD likely will break the July-Oct. trendline.
Originally published on MPTrader.com.