SCROOGE

Leave it to me to find a reason for the market to go down during the start of the holiday season here in the U.S. We'll start by looking at a weekly (longer term) chart of the SPY (S&P 500). The latest rally brought us to the 50% retracement of the move down from October 2007 to March 2009. This Fibonacci retracement is in the same area as the downward resistance line (black line on the chart). If the market isn't going to rally into the end of the year, this would be the place for it to start moving down. The problem with this analysis is that too many traders are looking at this area and are expecting it to act as resistance. We are at another critical intersection in the market. The dollar is testing a support level (see UUP), gold is showing signs of resistance (I'll talk about this later), and the VIX is retesting its lows around 20.25. I'm not suggesting that anyone go out and buy puts on the SPY right here, but it is another reminder to build you cash. I was stopped out of AEM today on the intraday rally. I knew that might happen. I normally like to have my stop above (or below) the 50 day MA, but this trade didn't allow that (a move above the 50 day MA would have all but wiped out my option value)...unless I decided not to use a stop. I did use a stop and was stopped out when the stock hit about $64. I will look to re-enter in the next day or so if gold starts to sell off. I still like this pattern and I still think gold is about to correct. Look at the gold charts that are in strong uptrends. They all have a very bearish candlestick. They all gapped up today, only to fade downward the rest of the day. In other words, they were down for the day, but still up compared to the close on the day before. In almost every example of this type of price action, the stock will go into a correction. In some cases immediately, and in others a short time later. If we "fill in" the gap tomorrow (or in the next few days), it will be time to jump back in. I didn't get stopped out of all my gold trades. I'm still in HMY and SA.