U.S. Stock Market - Major Top!

Almost every major U.S. Stock Market Index posted an all-time intra-day high this morning, but late day selling was significant and overwhelming. To me, it really doesn't matter why today's downside reversal unfolded, but the financial media blamed normal profit-taking following a great recent advance. Trading pros may see today's late day weakness as a "sell on the news" type response to the Fed's decision to stand pat with its ultra-easy monetary policy. Again, it doesn't really matter; a major top has been posted and confirmed by my computer-based trading system. 

Daily chart sell signals were triggered by my computer system at today's close in the Dow Jones Utility Average, the Nasdaq Composite Index, and the Russell 2000 Index (see Daily and Monthly Charts below). Two sector indices within the banking industry (BKX and XBD) also experienced daily chart sell signals. And several bond market trading vehicles saw sell signals (HYG, IEF, and TLT). 

My strong view is that tomorrow, Thursday, October 31st, will be a fairly significant down day for the U.S. Stock Market, and that this bearish action will then trigger computer-generated weekly chart sell signals in most major indices. This combination of daily and weekly chart sell signals would represent an ominous picture for the U.S. stock market immediately ahead and over the next several months, at least.

In the interest of full disclosure, I am long the S&P 500 "Double Short" ETF (symbol SDS) within my more aggressive managed accounts.

Russell 2000 Daily Bar Chart with Computer-generated Buy & Sell Signals

 

Russell 2000 Monthly Bar Chart with Computer-generated Buy & Sell Signals

Is Gold Really a "Slam Dunk Sell"?

Jeffrey Currie, the head of Goldman Sachs’ commodities research division, says gold is a “slam dunk sell”. Speaking at a panel in London on Tuesday (October 8th), Currie said that once the U.S. budget battle comes to a conclusion, the American economy will improve. So, that would make gold what he termed a “slam dunk sell” towards Goldman’s price target of $1,050 per ounce (a 24% decline from today's price).

Should you follow the advice of this experienced veteran who hangs his hat at the greatest trading firm on the planet?

This week's "tape" action in gold actually looks bullish to me. And if you consider that the director of commodities research at the greatest trading firm in the world actually announced yesterday that gold is a "slam dunk sell", then this week's relatively positive price action suggests the very real possibility that gold is NOT a sell, but is in fact a SCREAMING BUY!

Gold futures bottomed out in late July just below $1,200/oz. Gold then rallied in July and August to trade briefly above $1,400/oz. And today the October 2013 Gold future is trading near $1,300/oz. Could the decline in Gold prices over the last six weeks be just a simple 50% retracement consolidation before another spectacular bull run? I think so!

In my computer trading system, daily chart buy signals were triggered at today's close in the Gold Miners ETF (symbol GDX), Goldcorp (symbol GG), and Yamaha Gold (AUY). GDX and GG are down about 26% since their late August peaks on only a 10% decline in the underlying gold futures price. Other gold/silver mining stocks have been equally punished over the last six weeks.

Bottom line: Is anything a "slam dunk" in the securities/commodities business? I am not sure why Mr. Currie from Goldman Sachs would hang his neck out so far on this call, but I am sure that his prediction is certainly NOT a "slam dunk". My own view is that gold/silver mining stocks are now favorably priced again and will be among the biggest winners immediately ahead and into early 2014. In the interest of full disclosure, I have now accumulated a modest 10% portfolio allocation in the following gold/silver mining shares near current levels: Goldcorp (GG), Primero Gold (PPP), Endeavour Silver (EXK), and First Majestic Silver (AG). My intention is to add to these positions over the very near term.