A Special Message from Ricky Gervais

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This bloody symmetrical triangle on the 5 minute SPY chart has such a bloody sharp and pointy apex that you’d have to reckon a bloke like Larry Kudlow uses it as a blade to cut his bloody cocaine! *belch*

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[youtube:http://www.youtube.com/watch?v=cryMVK1PwuQ 550 412] ___________

The SPY has printed seven consecutive green weekly candles for the first time since March of 2009. Moreover, as you can see in the chart below, the SPY is above its monthly upper Bollinger Band for the first time in nearly three and a half years. Both of those two facts scream “extended,” and “short-term correction is near.” At the same time, there are still plenty of enticing long setups. How do you reconcile this apparently contradictory evidence?

You forget about marriage. This is not the time to get married to any one stock and dig your heels in for the big buy and hold, even longer-term swing trade. Instead, if you want to stay involved on the long side, consider dating and having a bevy of one-night stands, via shorter-term swing trades for a few days. Despite the increasingly accepted conventional wisdom that POMO and Ben Bernanke cannot possibly let this market fall again, the game is the game. The more things seem to change, the more they stay the same. Try not to get lulled into thinking that you have a bunch of friendly angels at the Federal Reserve smiling over your shoulder, making sure that you perpetually make money on the long side.

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Despite the impressive run in the precious metals during the past few quarters, the large cap gold miners have been notable laggards. As an example, IAMGOLD (IAG) has been the definition of “dead money” over the previous thirteen months, despite being nearly a tenbagger off of its November, 2008 bottom. On its face, this underperformance has caused even the most socially awkward and disturbing of gold bugs to stay away from the large cap gold plays and, instead, focus on the junior miners.

However, a closer look at the IAG weekly chart reveals a textbook symmetrical triangle, spanning over a year. The symmetrical triangle is generally considered to be a neutral pattern, despite having strong bullish undertones. With increasingly tighter price action, volatility tends to shrink as it nears the apex. We can see from the weekly chart below that the past year of broad compression is likely to end soon in the form of a violent explosion. Given the narrowing nature of a symmetrical triangle, the presumption is that this is a massive consolidation pattern, rather than a topping one.

Only time will tell, but I suspect that the large cap gold miners have successfully lulled the vast majority of traders to sleep, and are poised to wake up themselves in the not too distant future.

(Disclosure: I have no position in IAG)

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Plenty of excellent sites out there include more macro commentary in their links, namely Downtown Josh Brown and Abnormal Returns. I thought I’d share a “Traders Only” collection. Here are the traders that I have been reading today (click on links):

• Joe’s morning morsel.
• @wwwstockrake on Brazil stocks.
• “The Goat,” @gtotoy, with his excellent daily read on the $SPY
• Position Trader’s chart of the day.
• Vic’s intraday market stats
• Vj’s daily, original analysis. Check him out.

There are plenty of other key sources that I check everyday, so be sure to look on the right hand side of your screen for my “Recommended Links.”