COMMODITIES GET A BOUNCE -- $WTIC TESTS THE 200 DMA FROM THE BOTTOM -- $GOLD FINALLY HAS A SHORT COVERING RALLY -- COPPER RALLIES WITHOUT DIVERGENCE -- $USD SPENDS NOVEMBER TRAPPED BETWEEN THE DMA'S
$WTIC TESTS THE 200 DMA FROM THE BOTTOM ... Oil, Gold and Copper made big short covering rallies yesterday. More importantly, the $WTIC 200 DMA is tilted down now and the 50 DMA has crossed below. This is a price zone of significant resistance. We can see from the chart that this was an area of resistance for 15 months. When the price broke out to the upside, the same area became support. I would expect this level to be resistance again, especially with the 200 DMA, the 50 DMA and former price action all lining up at this $98-$100 area.
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Chart 1
$GOLD FINALLY HAS A SHORT COVERING RALLY... The sentiment in $GOLD is extremely weak which bodes well for at least a bounce. The shiny metal found support at the same level as the June / July 2013 low. The levels of resistance are stacked above $GOLD here as shown on the right. The bounce in June was also when the $SPX found a low. Now $GOLD seems to be finding support just as the $SPX is breaking down.
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Chart 2
$COPPER RALLIES WITHOUT DIVERGENCE... $COPPER is showing no divergence and the price is in the middle of the trading range. The $3.24 level is central to the price movements. You can see it rallied above or below the level and $3.24 became support or resistance. Without any meaningful divergence hinting at direction, $COPPER is wearing out the bulls and the bears.
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Chart 3
$USD SPENDS NOVEMBER TRAPPED BETWEEN THE DMA'S.... The $USD has been moving within an interesting range. With Oil, Gold and Copper all below the 200 DMA, you might expect the $USD to be above the 200 DMA. However, looking at the $USD chart, it appears to be trapped in between the support of the 50 DMA and the ceiling of the 200 DMA. There is also a major support / resistance area at 80.75. With the MACD having moved above zero, and then gently pulling back in November, it appears to be setting up for a big move to the upside. If it makes a conclusive breakout or breakdown, we'll watch closely for repercussions in the commodities. Even though the $USD appears stuck in the lower area of the trading range, commodities have not rallied. I find it interesting that most of the commodities and the $USD are below the 200 DMA, which is not a correlation I would expect.
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Chart 4
THE NOVEMBER HIGH ON THE $COMPQ MATCHED THE CLOSE OF DECEMBER 1999.... The November 2013 high was 4069. The December 1999 close on the $COMPQ was 4069. While both advances appear parabolic, you can see the final blowoff mania in 2000. The monthly candles were very extended.
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Chart 5
A CLOSEUP OF THE 2000 TOP... After a great December, everyone wondered if the computers would go black from Y2K. The following market day, January 3, 2000; the Nasdaq opened up 117 points higher on the open. The month of January oscillated above and below the 4069 level shown where the blue arrow is. After a volatile January, the market surged to the final high March 10, 2000. The month of January saw 2 pullbacks and one rally, with all three larger than 10%. Look at the size of the MACD levels of 200. The difference between the 12 DMA and the 26 DMA was 200 points! The Nasdaq volatility in 2000 $VXN was over 70. The chart range was over 2000 points in 4 months. You can see how the dotted lines mark support resistance zones on the left, that became meaningful on the way down.
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Chart 6
$COMPQ GAINS 29% IN 8 MONTHS.... Currently, the daily MACD has levels of 40-60. The Nasdaq volatility is under 20. That said, you can see the $COMPQ has gained 900 points in 8 months. This is a rapid advance by any measure. So while the advance seems heady, you can see the 1999 advance was euphoric. I would expect the market to start having significant pullbacks with higher percentage losses before we really start marking the top. So far, the moves look more like market rhythm than anything else. If we are marking a broader top right now, the levels of 3960 and 3850 are going to be very informative.
