Reaching Extreme Levels for Bonds, Gold, Silver, SP500, and Oil
Pre-Market Analysis Points:
- US dollar index in consolidation and also forming a mini head and shoulders pattern which if the neckline is broken points to lower prices for the dollar that may last 1-2 sessions.
- Gold and silver are both trading at resistance levels and are headline driven at this point. Anything could happen going forward so I remain on the side for now.
- Oil continues to show weakness but is now trading within a major support level. I am keeping my eye on the intraday charts for a reversal pattern to play a bounce/rally this week.
- Bonds continue to rise with record low yields... This shows there is real panic fear in the market and lower prices may continue for another week or two.
- The volatility index while elevated is still overall trading low. This means more downside is possible investors and baby boomers start to roll more of their money out of stocks and into bonds.
- SP500 sold down another 1% in futures trading after the closing bell which was very bearish. This morning we have seen the dollar index pullback and that has allowed the SP500 to recover the 1% post market drop on Friday.
Those of you short the SP500 with me should tighten your stops in case there is a sharp rebound in the market. The position is up over 9.5% in less than 5 days and I want to lock in a good chunk of that with a stop at this morning's high in the market or your low for your inverse fund depending on what you are trading
After Friday's weakness in stocks and commodities we continue to see that fear and selling pressure carry over into this week. European markets are trading lower by 1 - 2% and I fell the US market will naturally want to follow them down. Currently the US market is only down 0.5% so it is possible we see another 1 - 1.5% drop within the next 24 hours.
JP Morgan and Facebook continue to make new lows and that is putting some drag on the market. I think the biggest drag at the moment are the transportation stocks with that sector down over 2.2% today because of the weakening economic outlook from last week's terrible data out of the United States.
The selling taking place does look and feel as though there is power behind as investors around the globe are slowly moving to cash and hedge funds will be forced to liquidate positions to pay back their clients. Both of these things have a grinding effect and may last for a week or longer with any bounce getting sold into.
Gold and silver are starting to pullback a little and I will keep an eye on the price and volume in case it gives us a signal as to what is next.
Below is a chart of what I feel may take place at any time now so you are mentally prepared.
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