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January 29, 2007

Feeble Trading

Bears got just what they needed out of today's action: a failed rally. A slew of merger announcements was not enough to keep higher prices afloat, and the NDX closed below its moving average... as well as beneath the lower boundary of an ascending triangle... after making an attempt to re-conquer both.

stock chart

While the action has been encouraging to the bear camp, it is not quite time to don the party hats. Papa Bear may be yawning after a long hibernation, but he hasn't had his morning cup of coffee. We still need to see a nice solid, high-volume down day pulling us comfortably away from previous support.

Precious metals retreated a bit, continuing what appears to be corrective action, while the miners slumped about 2% after opening higher. I'm not quite sure what to make of the momentum divergences in Pan American Silver:

stock chart

Perversely, negative momo divergences have tended to bear false witness in general equities of late, but resolve perfectly fine in the case of miners. I plan to dig a little this evening to determine what to do with my PAAS position.

Several news items promise to light up the boards this week, including a GDP report and the first FOMC meeting of the year (Wednesday) and January's employment report (Friday). Given the crossroads at which the market trades, the reactions are likely to be volatile and very revealing.

Disclosure: Long PAAS


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