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June 24, 2009

Guts and Glory

I'm going to be brief tonight because nothing really changed or happened out of the ordinary. Also, stockcharts.com seems to be having technical trouble at the moment, so it's kind of hard to get a visual. The Fed, as expected, did not introduce any new malfeasant printing programs, and the best they could do to outright defend the dollar was to state they weren't going to expand the current programs. Such abstinence was enough to send the dollar index higher, though the strength in the buck did not manage to damage stocks. The S&P 500 closed marginally higher, and GDX had a golden day, rallying about 3%.

The S&P 500 now has the makings of a crawl along the 65DMA. (If you have complaints about the lack of charts, please send them to stockcharts.com). However, it is not yet time to get aggressively short. We need to see at least one more narrow-range day, preferably with a negative bias, in order to complete the crawl and setup for a break lower. In the meantime, there is still a threat of seeing a final ramp to gun shorts. Considering the fact that we have not seen any supportive volume to end this move lower, I believe the 65DMA will fail, probably by Monday.

Despite the strength in GDX, I do not expect precious metals to imminently follow higher. The back-test of $39 was expected, so I'm not going to re-evaluate unless $39 is taken out on a closing basis. Besides, these types of corrections in precious metals typically end on panic days. The next time we see silver down 70-80c during a session, the traders who will be most rewarded will be the ones with the guts to step in and buy.

 

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