Market Signs

- A high tide lifts all boats, and a low tide ditches everything. 

- Market Proverb

Change of Plans

We were going to revisit the precious metals this week as we felt the monthly chart would reveal a clearer picture going forward. The three black crows at the end of July got us nervous. Gold did drop below $3300, but the stronger fundamentals along with the calendar cycle overcame the short correction. The monthly chart ended positive. The drop was a head fake. No follow through and mostly, no volume. The slightly positive channel line had a breakout and gold set a new record high. YAY!

With that said, our other call on the market is bearing fruit in the harvest season. We told you that even though the bulls have kept market breath positive, the indicators that we watch gave us the warnng. 

Another Wall St. saying, "The market elevator rises with stops along the way up, but when it goes down, it is an express." You can easily see this if you chart with volume. Even though the market hit new highs in the S&P, Dow and NASDAQ, the volume kept dropping. It is like a retail store. You are selling product, but you have less and less customers. You know this is not a good sign. Then on down days, the volume is very strong. Can you see what we see?

 Last Friday

The Dow closed with a dark cloud candelstick on the daily chart. A short term bearish sign. We looked at the weekly. It was worse. A bearish engulfing candelstick. This is very negative. 

The S&P is totaly bearish in the daily and weekly chart. It had a bearish engulfing on both charts. Keep in mind that according to Dow Theory for a true rally all three indexes must be in harmony. The transports have never rallied or set a new high. 

Conclusion

The calendar is in its worst month for the market. The first day and week were down days on big volume. We see continuing inflation in food. Oil has been in a consolidation, but a better picture comes from Conoco-Phillips. They announced the layoff of workers between 20% and 25%. Not good. It people get on the elevator going down, it moves quickly. Like the wisdom of the opening thought, everything will fall, even gold. One reason is investors will sell their profits in the precious metals to cover their margin calls. It could be a gift to load up or enter into quality miners like Barrick, Newmont and Alamos gold...Peace.