Banks Fall But Gold Miners Rise, Can Gold Go Higher?
The market fell by nearly 1% yesterday. Volume stayed high, but was nowhere even close to the levels of last week. And in sharp contrast to Monday's session, energy and bank stocks were murdered. The big banks felt the worst the bears could offer yesterday as BAC (-4%), JPM (-2%) and C (-4%) led the charge lower in the financial sector.
More notable than the drop in big banks or big oil stocks was the inability of the bulls to maintain SPX 1197. On Monday the bulls were able to breach the 1197 resistance zone with a late day gasp higher. But I needed to see more buying activity Tuesday before I claimed bulls the victor.
The bulls could challenge that resistance area again today. And if they break it, 1220 is the next target. The 1220 area did not act as much support, but I think it could be a fairly potent resistance zone.
Basically, I think 1250 resistance is going to be incredibly strong in the short term. And in order to overcome it the bulls would need government stimulus, free money from Ben Bernanke and the Fed or blow-out economic news. Since I don't think any of those options are very likely this month I tend to doubt SPX can regain 1250. And the power emanating from that resistance area is likely to spread into 1220 and bolster that resistance zone.
If it helps you, think of 1250 SPX as a magnet. And the current price faces 1250 with the same magnetic pole. As SPX sits in the 1175 area it feels no repellent from 1250. But as the index moves higher the strength of the repellent intensifies.
While I don't think SPX will hit 1250 during the current rally higher, I haven't spotted any reversal candles either. The lack of reversal candles indicates an absence of strong selling pressure. With good economic numbers from the U.S. and solid corporate earnings the bulls could shoot SPX over 1200 and towards 1220 this week. Additionally, the dollar is falling against the euro, which should lend support to the commodity market.
Currently, I favor a move above 1200 and to 1220 resistance. From there I think the bulls will be rejected and SPX will decline back down to 1175 support. Then, so long as 1175 holds, which I suspect it will, the bulls will make another charge higher and back up to 1220. The next three to four weeks will likely exhibit a lot of ups and downs. But the collapse-type selling witnessed last week is over and it will not occur again this month.
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