Are You Still Skeptical About This Rally?

This is a bear market rally and it will terminate when it reaches its objectives. The objectives are to squeeze all those skeptical bears and trap those anxious bulls. With options expiration occurring this week, a high level of skepticism on the strength of this relief rally, and the latest announcement from the Fed on buying $300B worth of long term treasuries, the market continue to chop higher. As those skeptics sitting on the sideline feeling they might be missing the rally finally dive in and those stubborn bears getting squeeze on their shorts as the market continue to move higher, the rally will then come to an end. From the following charts, I have reiterated the levels I been monitoring. I believe this rally is getting close to the end. Therefore, I will be starting to trim my long equity positions and use tight stops. I will continue to focus on trading opportunities for the gold and oil ETF, GLD & USO respectively.








The Gold Trade

As gold retraced below the trendline and went under $900 an ounce today, a dramatic reversal occurred soon after the Fed announced its intention to buy $300B of treasuries. Gold recovered all its earlier losses and ended up nearly $40 an ounce, a $60 plus intraday reversal. The manner it reversed and that it closed near the high of the day shown the move had strength. Furthermore, its ETF GLD traded with extraordinary high volume. Today's move could be the trigger gold was waiting for to make another attempt at breaking above the $1000 mark. Click on the charts below to see my comments and also read my previous post on gold to see where gold might be headed.






The Oil

Conventional wisdoms would had bet that crude prices will be down since last weekend's OPEC meeting ended with no additional reduction in production output, and with this morning's EIA inventory report showing an increase of 2M barrels. But instead, it held its ground and stayed near the $50 level. Another reminder not to trade based on the obvious because the market will rarely do what is expected. From the chart, one can see the price actions are pointed toward higher prices in the near term. And in the market, price is king.