- S&P 500 Monitoring purposes: Sold long SPX on 7/2/20 at 3130.01= gain 1.5%; long on 6/25 at 3083.76.
- Gold Monitoring purposes: Sold (GDX) on 6/11/20 at 32.83=gain; long GDX on 6/8/20 at 32.79.
- Long Term Trend SPX monitoring purposes: Short SPX 5/13/20 at 2820.
- Sold long SPX on 7/2/20 close for a gain of 1.5%
1. S&P 500
Yesterday the SPY was higher, along with the VIX, which is a short term divergence. Yesterday’s rally to new short-term highs came on lighter volume, which is another divergence. Going into yesterday the SPY was up 5 days in a row. This suggests market will close higher within five days 83% of the time. A clue that market has reached short-term exhaustion is when the tick close above +700 and, added to other divergences could end up creating a short term sell signal. We are neutral for now.
2. CBOE Equity Put/Call Ratio
Below is the 21-day average of the equity put/call ratio going back to mid 2003. Readings below .53 have marked worthwhile pullbacks in the SPX and the current reading is .518. July is the third worst performing month of the year and usually a down month. The market was up five days in a row going into Monday and market usually trades above the fifth high within five days; suggesting Monday's high will be at least tested. One clue that market has reached short term exhaustion and possible a short term high is when the Tick closes above +700 range.
3. Gold Miners (GDX)
Momentum rules everything. Have said that, GDX closed at a new short term high Tuesday, but divergences are present. The bottom window is the GDX/GLD ratio, which closed lower than its previous high, marking a divergence. GDX advance/decline percent with 50 day average and GDX up/down volume percent with 50 day average both closed lower than their previous high, which is another divergence. We pointed out previous divergences in the chart below and they worked well in the past. Could this time be different? Maybe. In early July, gold usually forms a high and in mid to late July, a low. Again, momentum is everything and we will be watching closely to see if the current momentum will last.
