Today’s nervous action before the big jobs report makes me think that a blast might be possible. Of course poor job market data would trough the market of the cliff.That is for sure. The overall sentiment is pretty gloomy so the numbers don’t need to be spectacular to be able to spark a short-term rally in these kind of oversold markets.

I can’t deny the gold and the silver market looks like investors are raising some cash to be ready to buy badly beaten stocks in case of good numbers. Bonds, Gold and Silver have performed well during the hate crime against the stocks. Rotation might be the name of the game here. Nobody knows for sure except BO & Co. They already know the numbers. You can count on it.

SPY chart is not a pretty picture. This can go anywhere from here. The 500dEMA not shown in the chart has offered some recent support for the SPY. 38 % retracement line from March 2009 lows to April 2010 highs was tested and rejected today. Indicators are flashing oversold but how much it got to do with anything if the numbers are horrible tomorrow? It won’t be easy task to sell the market down from here but nothing is impossible. However, this still looks like it is preparing itself for the jump.

Money flowed out of the bonds eve of jobs report. TLT is one of the tickers I have on my active short candidate watchlist. This is far overbought. These papers are not that sweet at all. They don’t deserve this kind of royalty treatment they have got last couple of months.

GLD is trading in very strong up-trend 200d front weighted MA acting as a trend line. Looking for a buying opportunity near the support are. 

Huge sell off on SLV combined with a similar reaction on GLD and TLT indicates massive uncertainty. Cash is the king here and it is looking for a new place to go when the market opens on Friday.

Peace,

Matias

I share some charts with you to show what I see is happening right now. At the same time today was a horrible day and all of our long plays were stopped out and the same time the market did exactly what it had told us it will do.This was the most interesting day for long time.

The previous rally back up to the 50’s and rejecting it was a clear sign that this baby is trading seriously inside the box. Typical bear market behavior. Running up to the strong resistance to unwind the oscillators before heading back to the bottom. That is exactly what we got. I have to admit that I was somewhat blind to that move also so don’t kick yourself if you missed it. This is also why we keep our trade size small during the difficult market times.

Today’s false breakout still have to be confirmed tomorrow before it is official but in case it is, the markets are poised to stay inside the box. Rally would logically run up to 1080-1100 area (50h EMA & 200h EMA).

However, if we get powerful move down, it might be just an fishing expedition where the pros steal the stocks triggering the stops just below the support area or it might lead us to ugly new leg down. There is no way to know it right now. In case the selling turns out to real panic, we would probably see a back test of 1040 level after breakout and before the eventual rejection. If this is the case, the next stop for the down leg and the bottom of this correction period could be around 870-930 on S&P 500. In any case we expect this no man’s land period to continue to somewhere around October and November 2010.

However, the bulls won’t give the 1040 area easily. Bears really need to work hard to break that. It is the line in sand that separates us from the total disaster and enormous suffering. If we break it, the markets will wipe out a lot of good people and leave them dying slowly when the markets continue their uptrend. To make sure you understand what I am trying to say here watch our earlier video of this subject. http://www.youtube.com/watch?v=sGGGoOZRpc4

Possible positive divergences and significant divergence on FI(2) and FI(13) brings us hope of some kind of bounce. S&P 500 is trading at its lower auto envelope channel line indicating short-term oversold condition. This does not mean we need to rally up here. Market does what is does. It doesn’t have to do anything. If we keep that in our mind, we will avoid a lot of troubles.

Also the stochastic on the hourly line chart tells the story of deeply oversold condition. If we fail to bounce from here even shortly, the markets are in DEEP trouble.

Anyway, the cash is still the safest position. I would not short the markets from these levels, even if it could go lower. This is totally unpredictable and thus we stay mostly in cash at the moment.

Peace,

Matias

It is easy to see that people really hate the economy.  The statement that the consumer confidence is great is a big and ugly lie. Let’s face it. The economy stinks and people know it. You know it by looking around.

Have a look at the bond markets. In times of strong belief in own economy and job security, people put their money on the stock markets not in the bonds. Bonds are for scary people. If you are ready to lock your money for 20 years to get next to no yield, how much optimism do you really have? How much faith? NONE! That’s right. ZIP, ZERO,NADA. You simply want to put your money some safe place because you are scared of the Armageddon.

The second evidence is NIKE earnings. People are not spending anymore. They are saving. They are not investing. They are saving. Just have a look at TLT chart every now and then and you get the feeling what people think of their jobs and the overall economy.

Money flowing to bonds is all bad news and money flowing to the stock markets is telling the story of strong consumer confidence. Don’t believe the lies. Go for the truth. 

Peace,

Matias