Folks,
Market Observations for the Week: The SPX, NDX and IWM all declined on Wednesday and all three gave us a Negative Volume Reversal Day. The Tuesday after a monthly expiration is a pivot day and this week it’s a double pivot day because of the New Moon. However, we did not try to short the SPX at the close of Tuesday and preferred to hold cash. The high $TRIN reading of 1.78 on Tuesday and the low ISEE index call/put ratio showed enough fear to keep us away from adding puts or shorts on the SPY or IWM at this time. However, as we have harped on repeatedly, when the SPX fails to give us a decent pullback in September, we are wary of the following October – especially the second half – we are holding more cash than usual going into November. Gold gave us a 3-wave correction that tested $4017 early Wednesday and rebounded – how we trade through the next pivot day on 10/27-10/28 is now key. We watched the trade in gold and silver carefully into the 10/20-10/22 New Moon Timing Window and the bearish non-confirmation in silver kept us cautious and trimming positions in the PM sector. In the longer term, the GDX could test $90 by December, and silver stocks could continue to work higher since silver has made a weekly close above $50. Our current investment positions are: 20% cash, 5% QQQ, 25% GDXJ/SILJ/REMX, 5% XOM/COP/CVX and 20% physical gold/silver/platinum. We have a 25% overall allocation to our short-term trading account which was last updated on Monday to include: 50% cash, 0% SLV, 0% GLD, 25% SILJ, 0% ETHA and 25% XOM/CVX.
TURNING POINT DAY
Our next turn window is 10/21, which is the New Moon.
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