U.S Stock Market - Only Momentum....

U.S stock market goes up and nothing is able to stop it.
But the funny thing is that there seems to be nothing more than momentum. Sentiment, less quantitative easing and market breadth have a negative impact on stocks. At least they had...but not these days. I do not raise the valuation problem at the moment but...well, after more than five years of the bull market in stocks it is rather a hard thing to find cheap stocks (apart from the traditionally battered sectors as e.g. precious metals or coal mining).

Let us look at these charts:

Sentiment - optimism is easing but the market does not bother.....:

FED action - previously, when FED was cutting bonds purchases, stocks were correcting...but not these days:

Market breadth - less and less stocks are pushing market higher but...who cares about this serious danger?

 

Even Battered Precious Metals Miners Are Being Accumulated These Days

Precious metals sector is really a horrible place to be these days. It seems there is nothing positive on the horizon. But is it true?

Look at the charts below. The charts evidence some heavily battered PM stocks. Most of them are below their this-year bottoms. But one of my favorite indicators, Chaikin Money Flow, shows the relative strength of these stocks. If you look closely at the charts you will spot that this indicator (grey area behind the chart line) is today much higher than at the time when the last bottom was printed. In my opinion, this pattern suggests that somebody is accumulating PM stocks. And this "somebody" is not "weak hands" definitely (weak hands do not accumulate stocks in a strong downtrend).

                                                                              source: www.stockcharts.com

A Simple Strategy For Gold Stocks

Here is a quite simple strategy to play in the precious metals markets.
Assumptions:

• We play only GDXJ  - this is an ETF consisting of junior precious metals stocks
• There are only two positions: long GDXJ or short GDXJ
• a BUY signal is generated when GDXJ over-performs GDX (big precious metals producers) - then we have LONG positions
• the SELL signal is generated when GDXJ under-performs GDX - then we have SHORT position

Let us look at the chart below, which evidences this play:

Having played this strategy since August 2013 one could win 31.5 points (or $31.5 per one GDXJ share). This means a gain of 84%.
Presently there is a signal: go LONG GDXJ.

A Quick Look at the U.S. Stock Market

An interesting situation in the U.S. Some indices are in strong uptrends but some are developing reversal patterns:

                                                                           source: www.stockcharts.com

Looking For a Bottom In Precious Metals Shares

Firstly, the chart:

source: www.stockcharts.com

The chart above evidences four phases of the current precious metals cycle:

Phase 1 - both gold and miners are in an uptrend with miners going up more than gold - this was the strongest phase of the current cycle, which started in 2008

Phase 2 - again, gold and miners in an uptrend but miners loosing momentum (they appreciate in the same way as gold, not faster)

Phase 3 - gold is going up but miners are going down - miners are in a strong downtrend

Phase 4 - gold and miners are consolidating

Well, the most important thing is what is happening today:

• both gold and miners are not going down - this a big plus for the goldbugs
• there are trading days (as yesterday) when gold is a little bit down but miners are up - another plus
• this a consolidation stage and the direction where the prices will go after that is a question mark.

Another plus for the goldbugs is that it seems that Big Money, since 26 March 2014, has started to accumulate miners shares (I will show the Big Money chart later).

Conclusion: the technical situation of the miners shares is presently much better than in 2012 and 2013 with the chances of breaking up from the ongoing consolidation stage slightly higher than the opposite.

U.S. Stock Market - No One Rings the Bell At the Top

In my February 14 post I was looking for a top in the Nasdaq 100 index. Let me remind you the updated chart:

                                                          source: www.stockcharts.com

History repeats but the pattern has changed. Since February 14 the index have gone up a little bit but then....gone down and today it stands about 3% lower than in February 14.

What next? Of course everything could happen but the chart below is a sort of a ringing bell:

                                                                                      source: www.stockcharts.com

The grey area behind the index is the chart of Chaikin Money Flow indicator. Without going into details, this indicator shows whether money goes into stocks or out of stocks. As the chart shows, ahead of any major correction the Money goes out of  stocks - the slope of the indicator is decreasing (green lines). Looking closely at the chart you can see that a major correction is probably on because, despite the top in stocks, the indicator is very close to zero! What is more - due to the extended divergence (which started in May 2013) this could even be the topping pattern of the whole bull run.
The bell is ringing something big.

Gold Sector - Consolidation Stage at the Moment

There was quite much a hype in the media about gold sector recovering. Well, as most of my readers know, I am a gold bug so a little bit of my input on that subject would be justified.
But no. I have chosen to be on the sidelines.
Now, when the PM market pulled back quite strongly, here is the appropriate chart:

                                                                              source: www.stockcharts.com

As you see, there is not too much to say about PM market. Simply put, this market has done really nothing.
Hmmm....maybe not so fast. It has done something - it is not going down which is a very big PLUS.
As can be spotted in the chart, gold, miners shares and juniors shares  - all of them are in the consolidation stage. This stage started in April 2013 so its duration is about one year.
As the theory says, the longer the consolidation stage the more powerful is the the exit from that.
In my opinion this a very good time to focus on finding the best plays in the sector in the expectation of the the break up from this consolidation.
Otherwise, when the pattern is the opposite (break down), well....we'll have to wait for another opportunity.

At the end - one of the older charts.

                                                    source: www.stockcharts.com

As you see, the relation between gold and silver is still intact. Silver behaves a little bit better than gold, which is the same pattern as in the late 2008. This indicates that the possibility of the break up is relatively high.