The All New Market Analysis – May 9th, 2018

SPX Monitoring purposes; Covered  SPX on 5/2/18 at 2635.67=gain .15 gain; Short 2639.40 on 4/19/18.
Monitoring purposes GOLD: Long GDX on 4/18/18 at 22.98.
Long Term Trend SPX monitor purposes: Long SPX 3/14/18 at 2749.48.

Friday the Equity Put/Call ratio closed at .55 and yesterday closed at .54.  Readings of .55 and lower predict the market will retrace .8% on average over the next 3 to 5 days.  Yesterday the SPY tested the previous high of 4/30 on lighter volume suggesting resistance. It is said, “If a market can’t take out the previous high with volume, it will reverse and attempt to take out the previous high.”  The previous low is last Thursday low, which comes in near 259 on the SPY.   Notice that the Bollinger Bands are starting to “Pinch” suggesting a large move is not far off.  If panic forms (high trin and low tick readings) at that level will suggests support and market could reverse  higher.  If no panic is present at the 259 level, than market may continue lower.  Next week is option expiration week which has a bullish bias, and if the text of the 259 level comes late this week than we would expect it to show panic and setup a bullish expiration week.

The candlestick pattern that formed on Friday was a “Bullish Engulfing” that engulfed the previous three days.  The more days engulfed by the “Bullish Engulfing” the stronger the signals.  There was a “Bullish Engulfing” pattern in early April that engulfed four day and did produce a decent rally (see chart above).  Its common for “Bullish Engulfing” patterns lows to be tested and the market may be working on the test now.    This is the week before option expiration week which can produce whipsaws.  If the pull back does materialize as expected a bullish setup could form near 258-259 range which is where high volume lows formed (most high volume lows are tested). Would look for panic in the Tick and Trin in this vicinity to help confirm a bottom.

The above chart just looks at the momentum for GDX and the GDX/GLD ratio.  Momentum turned up for GDX in mid March as GDX jumped above its mid Bollinger Band which turned up the mid Bollinger band.  As long as the mid Bollinger band is trending higher so should GDX.  The window below GDX is the GDX/GLD ratio which also jumped above its mid Bollinger band in mid March and is holding above it and a bullish sign.  Note that both Bollinger band for GDX and GDX/GLD ratio are starting to pinch suggests a large move is coming.  There was minor weakness in the Bullish Percent index closing to 50% down form 53.57 last week.  However as long the Bullish Percent index holds above 40% the uptrend should continue.  Notice that GDX/GLD ratio is near short term highs where GDX is below its recent highs showing GDX/GLD ratio is outperforming GDX and that is what usually happen in a GDX uptrend. Long GDX on 4/18/18 at 22.98.