Can You Smell It?

Saturday, June 20. This market has a strange smell about it. The Fed made a major corporate bond purchase Monday, which turned the market around and caused it to move up much as it did Thursday May 14. Monday was a great day. But, it’s been all distribution since, and Friday was not a good day. Granted it was options expiration day, and that can always cause volume and price anomalies, but Friday saw quite a bit of selling and, if you look at the intra-day, minute-by-minute, it looked quite dreadful. Especially the last five.

Then, on the other hand, a look at GLD, in the same manner, had a fine day, closing on its price high, and the volume in the miners was very strong, on average… some 70% greater than its 50-day average of volume.

Why was the Fed not able to “goose” the market into all new high territory? Why is gold looking to get some strength together to challenge its previous highs, and possibly breakout. Is it going to be “Game Over” for stocks? Is the “Hand-Writing on the Wall?” 2965 on the S&P 500 is the new line drawn in the sand where the Fed stepped in to buy, and is now SUPPORT.

Maybe it was just option expiration day, but it sure didn’t look like the Fed was able to make it go where they intended for it to with all of the manipulative stimulus they created Monday. All market gains from Monday’s action and news on their part… It doesn’t look to last!

Chart the 500 and see the gap up at Friday 6/5’s open and then the gap down open into Thursday the 11th. The four-day, 6/5, 8, 9 and 10, is called an Island Top. The gaps are a zone of resistance, and the Fed was not able to induce the market to even close or fill those gaps.

Next week is likely to be critical to the market. It must fill and close above the gaps, and get above the island. And, the 50-day is closing in on the 200-day for the possibility of a “Golden Cross,” which tends to be a very bullish sign.

So, close the gaps, and get above the island, or die? But, get up there, and the Golden Cross comes into play… calling for more buyers to allocate more money to stocks. The tension is quite high, and the next week or two should be quite interesting!

Harold