Serge Berger is the head trader and investment strategist for The Steady Trader. Sign up for his free weekly newsletter.
After last week’s volatility, stocks seemed lethargic yesterday for most of the day. Digestion was the mode of the day despite a late-day rally after some positively perceived comments out of Greece. Overall, it was an uneventful day, so I don’t want to read too much into the trading action.
The daily chart of the S&P 500 shows us that we remain in the middle of the bear flag, but also right at the downward slowing 50-day simple moving average (lower blue line), which may act as some sort of resistance. While the 200-day simple moving average would act as better resistance, it is still about 6.5% away. The daily stochastics have room left for further upside, but could also turn on a dime anytime now.
Gold, silver and oil were all notably weak yesterday. Gold as measured by the SPDR Gold Trust (NYSE:GLD) looks increasingly weak, as it yesterday closed below an uptrend line that has been in place since July. Also note the previous and much steeper uptrends it broke in recent weeks.
The recent strength in the U.S. dollar is certainly a significant contributor to the weakness in gold. The dollar strength should also lead to further weakness in equities at some point soon.
The best reference point in terms of risk appetite I can point to today is found on the chart of the CBOE Volatility Index (VIX). Note how important the 30 level is, and that happens to be where it bounced off of last week. If 30 can hold as support, then stocks should have a difficult time riding higher in coming days. Of course, that is just one metric, but it is an important one.
The lines in the sand on the S&P 500 are 1,220 and 1,240. If the bulls can’t take these levels, then the odds of the bears beating stocks down to 1,100 are much greater.
- See Sam Collins’ Daily Market Outlook: Nasdaq in Dangerous Territory
- See Sam Collins’ Trade of the Day: Undervalued Gold Stock Yielding 10%
- See Serge Berger’s Trade of the Day: Can UPS Deliver Profits?
