SPY Tests Previous High

Last Friday, SPY tested the previous high of last Tuesday on higher volume and suggests Friday’s high will be at least tested if not exceeded and keeps the door open for a rally this week. It is said that the VIX leads the way for the SPY in the opposite direction. Last week the VIX made a lower low below its Tuesday low, suggesting at some point the SPY will make a higher high above Last Tuesday high. A rally to the open gap near 247 on the SPY is still possible and if tested on lighter volume will imply resistance and an area where a sell signal could setup.  

The current pattern forming on the SPY still appears to be rhyming with the pattern that formed back at the November December 2015 top.  The “You are here” notation matches up well and a minor rally to test the August 17 gap near 247 could complete the third top of the three top pattern.

We are bullish on GDX and Gold on the monthly timeframe. The daily timeframes are a little more troublesome. For a bullish resolution for both gold and gold stocks, the Gold stocks usually outperform gold (A rising GDX/GLD ratio) and that is not what is happening here. Notice that GLD is above its April high and GDX is still below its April high, showing gold is stronger than gold stocks.  Also the Commercials have jumped their short position to 220K.  The previous two times in the last six months where Commercials where above 200K short where at the April and June highs.

It’s also common that gold and gold stocks have reversals around Labor Day (one week from today). We are bullish on the bigger timeframes for both gold and gold stocks but the short term picture is not ideal for a continued rise in both.  At worst we will be late on the buy signal but still catch the major part of the rally or a pull back does materialize and we buy at a better price. Still neutral for now. 

SPX Monitoring purposes; Sold 8/23/17 at 2444.04 =gain .58%;  Long SPX 8/17/17 at 2430.01.