Market Timing Brief™ for 10-20-2011: Looking Through the Fog

It was another up and down day run by a statistic here and a rumor there.  The action was simply noise on the charts.  The reason I said today that the market is likely to resolve the current range to the downside is because it usually has done exactly that after sliding sideways in a consolidation for 6 days or more.  Now the move down from here COULD be shallow or deeper, even just one big down day followed by more upside.  But it could be something more serious.  I would not venture to go further than that, because our current visibility is pretty foggy.

The semiconductors were down another 1.70% today and Intel gave up its gains from the previous day as I predicted and Tweeted yesterday dropping 2.85%.  The Semi stock index was down big yesterday and INTC was up big.  That made no sense.  Sense eventually returns to the market.

The volatility index that measures the fear in the market (VIX) was up today, but not by much.  It pulled down from some resistance overhead, but is still in rally mode until proven otherwise.

Commodities only got to the middle of their down channel and turned back down again (CRB Index).  Gold fell but held important support – so far.  The dollar index went no where today, so the gold selling was organic selling, not related to dollar weakness.  There is a more extensive comment on the GLD ETF  trade on the “Tips” page on the main website.  If you have signed up for the “Tracker and Tips” newsletter, access is free.  You can do that here: ”Tips and Tracker” Sign-up

On the positive side, the banks are still holding on with the BKX staying above the 50 day moving average.  It’s the same for the housing stocks.  They are holding up.  So did European stocks today.  Pacific stocks slipped a bit more though and the emerging markets look sick.

As mentioned, consolidations like these in the SP500 Index rarely end with an immediate upside resolution.  Much more likely is that there is either 1. a quick several percent drop followed by a continued rally or 2. a much deeper correction.  This makes trading it very tricky if you are expecting to catch the dip.  Buying the reversal may be more effective.

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