Monday, October 26, 2009

Another Downside Reversal

Top Line: Monday was Not up and that is something new...that we like. Monday showed yet another big reversal to the downside. These are bearish days and most likely are setting us up for a solid down move.

The market took off like a rocket this morning especially in the NASDAQ 100. In a half hour the NDX was up 1.5% and held there for about an hour when it fell out of bed suddenly. In the next hour, NDX fell 2% wiping out the early morning launch and then some. The rest of the day was spent just treading water. But, the action in NDX actually was an outside down day.

All of these downside reversals we have seen in the market the past few days should resolve to the downside. GDX is one of the confirming indicators. Maybe we should start with the dollar's rebound today.

The dollar was very strong today giving some deep knee bends for the commodities. What is kind of surprising was that the bonds were down today, too. We can rationalize that with the fact that the US Treasury is trying to sell a very large amount of debt this week. The dealers need to hold prices down so they can buy 'em cheap. Or, they are just going down. We are expecting the stock market to go down and some of that money should go into the dollar denominated US Treasury bond market. Just not this week.

Going back to GDX, gold was down about $15 dollars and GDX was down about 2 bucks at 44.69. This was after GDX was up about a buck in the early morning launch. GDX seems to have topped for the time being at the 49.74 high about two weeks back. So far, we've seen a 10% drop in GDX and we expect that it will lead the market down some more. We will be looking at buying GDX back under 40. We're not completely sure we will but we are keeping an eye on it.

Yes, Jackson likes swimming... Humpty Dumpty sat on a wall, Humpty Dumpty has a great fall. Now fall into the pool, Jackson.


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