SPX Monitoring Purposes: Sold long SPX 8/18/20 at 3389.78=gain .49%; long 3373.43.
Monitoring Purposes GOLD: Long GDX on 7/8/20 at 38.62.
Long Term Trend SPX Monitor Purposes: Short SPX 5/13/20 at 2820.
“Labor Day” is this coming weekend and market holiday’s can produce reversals. Ideally, one would like to see a +500 uptick close this Friday for a possible setup. The last time we had an uptick close greater than +500 came on June 10, the day before a 5.77% drop. This week may be a calm week leading into a holiday. Staying neutral for now.
Above is a momentum chart (momentum rules everything). Above is the daily SPY going back to mid-2003 and the top window is the RSI. When the daily RSI (14) for the SPY reaches 80 (did on 8/28/20), that suggests it’s not the final high. The red thin vertical lines are the times when the daily RSI reached 80. Final highs can form when the RSI stops around the 70 level (identified in pink regions). September option expiration week has odds of being higher 77% of the time (September 14-18). The week after option expiration is the weakest week of the year. If August closes at an all time high, then September is down 79% of the time (Steve Deppe). Also, the early October period is weak in regards to Seasonality. Yesterday, we said, “Momentum rules for now, but sentiment is at extremes. Another interesting bit of information, if August is up 5% or more (up so far 7.24%) then the first week of September (this week) is up 72% of the time. It is common for signals to generate around Holidays and the coming weekend is ‘Labor Day’ – markets are closed on the following Monday. We would like to see an uptick close greater than +500 come this Friday to suggest exhaustion of the uptrend.” If this signal is triggered, it would suggest next week (the week before option expiration week) will be down. Therefore, we could see a “Seesaw” in the market over the next couple weeks.
Today’s decline gives credit to what we said yesterday, “We don’t believe the rally from the March low is done and another rally to new highs is possible. There is still a possibility that the Selling Climax low of August 11 may be tested before the next impulse rally up starts. This coming weekend is the Labor Day holiday and a week from today, next Monday, is when markets are closed. Gold markets have a good history of reversing around holidays. If gold markets rally into this Friday (Labor Day weekend) then it could present a high and, if declining into Friday could be a low. There is no guarantee that a pull back will occur to test the 8/11 low, but we have found that, the higher the Volume on the ‘Selling Climax,’ the more likely that the selling climax low will be tested and the 8/11 low had very high volume. Another thing, the higher the volume on the selling climax, the more likely the test will hold. Another impulse wave is coming and a test of the 8/11 low is possible; if tested, it would be a good place to add to positions. Silver stocks should outperform gold stocks on the next potential impulse rally. The next impulse wave high may end the rally phase that began at the March low. So the next high could lead to a multi-month consolidation that could extend into next year.” Long GDX on 7/8/20 at 38.62.