The market sold off today during options expiration, but it is still holding most of the gains made from the recent up move. Looking at the technicals and the sentiments, I believe there is still more upside to come. The market might pullback to test for support before making its next move up. This test will give us a confirmation on the validity of the next move.
The chart below shows the DJI pulled back from the Nov 2008 low and it could end up at the nearest support level around 7100. If it fails to hold this support, then this relief rally is over and the DJI will be headed down for a new low. If it hold support at 7100, it can move back up to the 7500 level and possibly break above it. This next rally could be the one that will move some of the money on the sideline back into the market. Currently, there are too many people with the mindset that this is a bear market rally. Although we all know that is true. But the market will defy the herd mentally. It will continue to move up to force those non-believers into believing this rally is more than a bear market rally. In order to do this, the DJI will need to move above the 8000 to lure some of those sideline money in. My current scenario is, DJI need to hold 7100, then test 7500 and move toward 8000-8300. Of course, the market will be the ultimate decider on what it will do.
For the SP500, it pulled back from a confluence of resistance. It encountered resistance from two trendlines and the 50 SMA. It needs to hold support at the 750 level in order for the rally to continue. If the rally continue and it breaks above 800, it can potentially hit 870 before this rally come to an end. It is this possible scenario that I am holding off on shorting the market until I see more evidence that this bear market rally is coming to an end.
The Nasdaq 100 is still inside the trading range, and I expect it to continue to bounce around in there until it breaks the 1130 support.
Oil broke above $50 a barrel and heading higher. $55 a barrel is very likely in the near term.
Mid 30s for the ETF, USO is possible.
Gold took a breather today at a relatively low volume comparing to the two previous trading session. I believe it could hit $1000 an ounce and the ETF, GLD will go above 98.
My position on the market is to wait for it to pullback to support level. If the market hold support, then re-initiate longs otherwise renew shorts as the market is still in a bear market. I am continuing to monitor for trading opportunities in gold and oil via their ETF, GLD & USO respectively. These two commodities are now a play on the weak dollars and future inflation. Deflation at the moment is off the table with the latest Fed decision to buy long term treasuries.
