Using the four chart on the S&P 500 (SPX), the daily Keltner/Bollinger (K/B) had originally supported the upside. Generally, when the K/B is in effect to the upside, it should continue persistently. There is no deep retracement and consolidation is minimal. The K/B can fail and if it does, it generally has about two days to reverse the K/B effect. Today’s action suggests the reversal has taken place and prices should be persistent to the downside with minimal give back.
The gold proxy, SPDR Gold shares (GLD), was mentioned last in the April 4th post where the bounce did occur off the DeMark 9 on the daily chart but was indeed short lived. Now for a look on the bigger picture. GLD may not be the buying opportunity everyone expects if the above chart is any indication. If wave action is putting out a verdict, it is either a C wave down or a 3 wave down. Both are bearish and both are the strongest wave which turns gold bulls into gold bears. Also, DeMark setups are no where to be found so price exhaustion is not a factor. To make matters worse, the K/B indicator on the monthly chart is about to be released to the downside which supports the Elliott wave action. If anything, GLD is a sell on the rip if there is any.
I may have to flip flop on this one and go bearish on the equity markets without waiting for confirmation. Elliott wave action suggests SPX has already extended and DeMark indicators are long overdue. But we have seen this over and over where markets give every indication a high degree selloff is about to commence just to reverse back to the upside. What is one to do? There was a simulation game on the options floor to test new traders. The board would flash prices in intervals and participants had to buy or sell accordingly. The one with the most dollars would win the contest. As the prices were displayed, many participants employed all types of strategies – both odd and sound. However, the winning participant’s strategy was simple. He bought when the board displayed a positive number. He would then hold and sell when it displayed a negative number. His results started out muddy but eventually caught a trend and won by not guessing market direction but following it. We’re in that kind of market now. (updated mid trading day).