Playing it Straight Up is Best

I see that the gold miners are vastly underperforming the bullion once again. When it comes to the “fear trade,” there are not many, if at all, substitutes to playing Treasuries, the Dollar, and physical Gold. It is also worth noting that jewelry stores are among the worst performing stocks today, as a whole, with TIF and ZLC cratering.

If stocks are going to make a higher low (above 1101 from last week on the S&P 500), then I believe that fear trade will need to stall out here. There is not much evidence of that happening today yet. Looking at a daily chart of GLD, though, we see a gap up doji today. It is mere speculation on my part, but a gap down tomorrow would put a doji reversal into play, especially given the context of the overall chart. Again, gold is still in a powerful uptrend, and emotions are running high. So, I am not eager to get aggressive on this possibility. At some point, the fear trade will abate. I believe gold has gone from a reflation play to a fear play i a short amount of time, despite what you hear from experts about China and India demand. The longer this fear trade persists, though, the more we are apt to see days like today in equities.

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Yep. Red light district it is…

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That rare diamond bottom patterns on the 30-minute charts that I pointed out on the S&P 500 and the Dow Jones Transportation Average are now in danger of being negated. The trannies already marginally breached the low from the diamond, which is quite weak indeed, as it puts the bulls in a position to hope for a double bottom at best. The SPY is back to the median price of the diamond formation, which is not nearly as weak as the trannies obviously. That said, much of the progress made by the bulls over the past few days has been lost, and it is time for them to try to regroup. Moreover, price looks to be bear flagging currently.

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The market opened down massively this morning, continuing to plunge after the opening gap lower. Currently, the major indices are down roughly 4% or more across the board. This type of action destroys any hope for a constructive series of slower days this week. Instead, the bears are back in charge, and the lows of last week at 1101 are in sight. At the time same, the bulls are looking for a major higher low. 1150 on the S&P 500 has been a key multi-year area, so it was telling that we sliced through it this morning with ease, indicating just how strong the selling pressure is. The few light long positions that I had are off the books, and I am back to 100% cash, not wanting to put myself in a position to merely hope along with the bulls that we stabilize and make a higher low.

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The following two Mexico-based beverage firms represent the epitome of a strong uptrend, not to mention incredibly impressive outperformance to the broad market over the past several weeks. What that tells me is that they have a very strong underlying bid to them, even when the broad market essentially crashes. Should the S&P 500 rally higher, I expect these two to continue to outperform. Keep them on watch.

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