Email this post
Bears Beware
I’m going to go through some signs that rabid bears might do well to pay attention to because I think the market is very close to a major bottom. (That doesn’t mean we are guaranteed to make new highs, although we might. Just that we can probably expect an explosive rally soon, even if it ultimately turns out to be a counter trend rally in an ongoing bear market).
First off, way too many people are counting on the head and shoulders pattern taking the market directly down to 850. Folks, historically these head and shoulder patterns have a success rate of about 50%. A coin toss, in other words. Didn’t we learn that lesson last July?
Let’s go now to the charts. We have a large momentum divergence that has developed on the daily charts.
Also, notice that the market dropped down to the 75 week moving average yesterday and bounced strongly. You can see this same support during the prior bull. The 75 week moving average acted as final support during the entire bull market. That level also happens to be the 38.2% Fibonacci retracement of the entire cyclical bull move. Not an unusual correction in an ongoing bull, on both counts.
Next, we are now right in the timing band for a major intermediate cycle low.
At 21 weeks it’s just way to late to press the short side. You risk getting caught as the intermediate cycle bottoms initiating a violent short covering rally.
And finally, breadth is diverging massively during this final move down. As you can see the NYMO often diverges at these intermediate cycle bottoms. The divergence at this point is the largest in years.
Finally, I’ll point out that the February cycle bottomed on a reversal off the jobs report. I think it’s safe to say the market has already discounted a bad number so we could see shorts begin covering in a buy the news type trade, even if the number is bad. And if the number is good, we will see the market gap higher huge, trapping shorts and throwing gasoline on the fire of a short covering rally.
It’s just too dangerous to continue pressing the short side at this point. Better to just step aside and not risk getting caught in the intermediate bottom that WILL happen sometime soon, maybe even on today’s employment report.
GoldScents is a financial blog focused on the analysis of the stock market and the secular gold bull market. Subscriptions to the premium service includes a daily and weekend marketupdate emailed to subscribers. If you would like to be added to the email list that receives notice of new posts to GoldScents, or have questions,email Toby.
Related Posts:
Email this post
Share this post....
Oceana Gold is now available at 2.92 CAD (which also happens to be the MA50) which must be considered as cheap for this quality mid tier producer.
Their Q2-report is a near time trigger and it will show some amazing numbers.
I think this is an excellent entry point for those of you who still hasn’t bought into the company.
Sorry if I hijacked the thread.
Hi Fredrik,
I just heard back from them recently and am working feverishly to complete my trading card on them. I hope to have something soon. I had to work many many hours this week on my day job, so I could not get much done
@Fredrik of Sweden
Thanks……
OGC’s Q2 report is due July 29, I urge investors to accumulate a healthy position by then. This date will probably signal the next phase in the reevaluation of OGC.
Some investors panicked last week and sold at 2.70 CAD, they clearly had no clue about what they were doing and allowed their emotions to control their decision making. Why sell a quality stock when RSI is at a 12month all time low of 31??? Two strong trading days later and we now see 3.14 CAD.
Our conservative target is still 5 CAD for 2010 (Au@1200).