What to expect now. Monday, November 26, 2001. Ord.
The "Percent Volume" indicator closed today at .56 and in bearish territory. The "5 day ARMS" on the NYSE closed today at 4.79 and in neutral territory. The S&P appears to be finishing an Elliott wave ABC rally off the September 21 low (we are in the last rally phase now). The most bearish thing the S&P could do this week is to rally and have the volume decrease. When a market rallies and hits new short-term highs and volume decreases, the outcome is always the same-a decline. Today the December S&P traded above the previous high of November 19 on a 16% decrease in volume. Today in candlestick charting on the December S&P a bearish "Spinning Top" formed. The VIX on the NYSE has not reversed yet to signal the top. Therefore, the S&P could still inch higher near term. When the VIX reverses and gives a sell signal we will short the SPY. We are still short the SPX for the moment. The minimum decline expected on the S&P is to 1040, which a 50% retracement.
The "10 day ARMS" on the Nasdaq came in on November 19 at 6.45. When the "10 day ARMS" closes below 7.0, an intermediate term top is approaching. The Nasdaq VIX hit a low today of 48.06. At the May 22 high, the Nasdaq VIX hit a low of 51.84. Readings between 45 to 52 appear at tops. However, the Nasdaq VIX has not reversed and could head lower and the market head higher. What is important though, is that the VIX is in a bearish area where a reversal is likely in the near term. From the low of November 12 to the high of November 19, the NDX retraced 61.8% of that upmove. That implies the next time up the NDX should make a double top at the November 19 high (which is near the 1617 area). On today's rally, the NDX tested the November 19 high on 12% less volume. A test of a previous high on lighter volume is a bearish divergence. No bearish candlestick pattern formed today to confirm the bearish volume divergence. There could be one last spike up before heading lower. There is a chance the QQQ could approach 42 in an exhaustion move. The VIX has not reversed its downtrend yet, but that could happen tomorrow. One last gasp, maybe. We are short the QQQ at 37.75 and re-entering our stop at 40.65. Volume is not confirming the rally. If the VIX reverses tomorrow, we may double up our QQQ position if our stop is not hit. If the VIX reverses tomorrow and our stop is hit, we will re-enter short QQQ.
The XAU is in the final sell off for a multi month rally to begin in the next week or two. The Weekly and Months charts on Gold remain bullish. The Gold stocks we like are Drooy, NEM, HL and HM. All have bullish charts on weekly bases. A minor "Selling Climax" may occur near term to end the consolidation off the May 22 high. Our upside target on the XAU is still 95 minimum.
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