We sold our long position in the SPX last Thursday for a 1.49 percent gain. This is the week before option expiration week which has a history of whipsaws and volatility and therefore are being careful in this time zone. The top window in the chart above is the McClellan Oscillator which hit a higher high today and a bullish short term sign. The next window down is the VXZ/VXX ratio. We use this chart to help define the short term trend. If the VXZ/VXX ratio turned up today we would have considered another long position on the close today.
However it moved modestly lower and did not give us the addition confirmation like the McClellan Oscillator. However, notice that the VXZ/VXX ratio is above its moving average and suggests the larger trend is up. Tomorrow is the FOMC meeting which could add to the potential Volatility. The bigger trend is up and we are looking for a bullish setup for the short term. Staying flat for now.
Above is the VXV/VIX ratio which has a history of showing divergence and turns in the market. The Negative divergences are print in red and the bullish divergences are printed in blue. Over the last several days the VXV/VIX ratio has shown a minor negative divergence and suggested a pull back in the SPY.
So far the market has not really pull back yet and may not pull back. Tomorrow could be an important day with the FOMC meeting and considering this week is the week before option expiration week. If the market does manage to pull back, we would look for a TRIN close above 2.00 and a Tick close below -500 as one of the bullish setups. Or that VXZ/VXX or VXV/VIX ratios starts to produce a bullish divergence. For now we remain flat.
The chart above is updated from last Wednesday and is the weekly chart of the HUI. There was a “Sign of Strength” (SOS) through the 460 resistance which is turns implies the 460 range should act as support on any pull back (Support on GDX is now near 47). We have labeled the weekly bullish setup for the Slow Stochastics (turning up from below 20) and the weekly RSI extreme readings turning up from below 30.
Also the weekly HUI/GLD ratio has broken its downtrend line showing Gold stocks are now stronger then Gold. Yesterday’s report we showed the bullish setup and buy signal for the XAU on the monthly chart. The weekly and monthly timeframes for the gold indexes are on buy signals.
Long GDX 58.65 on 12/6/11. Long SLV at 29.48 on 10/20/11. Long GDXJ average 29.75 on 4/27/12. Long GLD at 173.59 on 9/21/11. Long BRD at 1.67 on 8/3/11. Long YNGFF .44 on 7/6/11. Long EGI at 2.16, on 6/30/11. Long GLD at 147.14 on 6/29/11; stop 170 hit = gain 15.5% . Long KBX at 1.13 on 11/9/10. Long LODE at 2.85 on 1/21/11.
Long UEXCF at 2.07 on 1/5/11. We will hold as our core position in AUQ, CDE and KGC because in the longer term view these issues will head much higher. Holding CDE (average long at 27.7. Long cryxf at 1.82 on 2/5/08. KGC long at 6.07. Long AUQ average of 8.25.