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April 27, 2009

Thumb Twiddler

Nothing happened today, folks. The waiting game continues. Sure, bear positions look a little more profitable than Friday's close, but it's a moot point since the market provided no impetus to close positions or to move stops. We just sit tight here and wait for equities to either break lower or move above SPX 875 and stop us out. Last Monday still has the potential to mark the swing high for the rally out of March, but it sure is peculiar that we have yet to see a break. After a severe one-day drop, a 2-3 day consolidation is normal. Five days is pushing it.

stock index chart

Still, there is no reason to panic and close shorts. Market internals are on our side, and the probabilities still favor a larger drop. The intraday view tells the same story:

s&p 500 intraday chart

Interesting dynamics, to say the least. Anyway, for those of you who still believe the market will surge higher, I put this question to you: which sector will lead?

banking stocks

transportation stocks

retail stocks

energy stocks

Now you see why I like the idea of being short OTM calls here. Whether or not the market delivers a larger decline, it seems tenuous at best that a significant advance materializes from the current point.

The dollar also regained its broken trend line:

dollar chart

A continued move higher in the buck would obviously pressure stocks, as well.

Silver popped nicely higher this morning only to forfeit those gains by afternoon. The range was not large, so I'm not terribly concerned about the late weakness, particularly since mining shares continue to act constructively.

gold mining stocks

GDX is gearing up for a move to its next pivot level at $42, in my opinion.

Tuesdays have an uncanny tendency to be pivotal, and we're due for a strong move. Let's see what the day can bring.


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