SPX, GDX And Gold Technicals: April 26, 2017

This week is option expiration week which normally has a bullish bias. The chart above is the CBOE Volatility Index. The VIX normally trades opposite of the SPY. Today the VIX was down (showing less volatility) and the SPY was down. Its common for the VIX to lead the way (in the opposite direction) for the SPY and today’s down VIX suggests the SPY should be going up. A positive divergence is present for the VIX suggesting the rally in the SPY is not done. The pattern that appears to be forming is a bullish Head and Shoulders bottom. First up side resistance is near the March 1 high at 2400 range on the SPX. Long SPX on 4/13/17 at 2344.93.

Last Thursday the Equity Put/Call ratio closed at .98, readings of .75 and higher predict the market will be higher on average of 1.3% in the next five days 88% of the time. The bottom window is the three day average of the Equity put/call ratio and readings of .80 and higher send a stronger message the market will higher. This chart goes back one year and three months and in all cases where the three day average of the Equity put/call ratio reached .80 and higher the market was higher each time. In general, expecting market to move higher and test the March 1 high near the 2400 range on the SPX. SPX on 4/12/17 at 2344.93.

It is said that the GDX—GLD ratio leads the way for GDX. Today the GDX/GLD ratio retraced 61.8% of the move from the late March low and closed near the 38.2% level. GDX retraced 38.2% of the move from the late March low and closed just modestly down. Since GDX/GLD ratio is much weaker than GDX, it suggests weakness ahead for GDX. Though the RSI for the GDX/GLD ratio is still above 50 (but not by much) which is still bullish but has weaken today and any weakness tomorrow on GDX/GLD ratio will push the RSI below 50 and in bearish territory. The GDX/GLD ratio showing weakness ahead for GDX. Sold GDX at 24.27 for a modest loss; Long GDX on 4/13/17 at 24.54.