The State of the Trend

By: George Krum | Sun, Oct 27, 2013
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Last week our expectation was that the market is due for a brief period of consolidation. The SPX made a new high on Tuesday and then finished the week a hair above that high.

In the process, the index broke above the ascending wedge in play since the beginning of October, and is trading in what appears to be a new trending channel:

SPX Daily Chart
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The Vix market timing system remained on a buy signal, trailing a 85+ SPX points upside move:

GSPC Weekly Chart
Chart courtesy of OddsTrader

In a couple of days at their next meeting, FOMC members will likely congratulate themselves for a job well done and promise to keep things the way they are. So it would be interesting to examine which industry sectors have benefited the most from their largesse.

It should come as no surprise then, that the best performing industry groups in 2013 are: Music & Video, Electronic, and Toy & Hobby stores, Gaming Activity and Internet (thanks to booming business in online porn and gaming, no doubt). They all fall within the broader category of consumer discretionary products (cyclicals) which tend to do well and outperform the market during economic expansion (or the accumulation of easy debt if you prefer). When the time comes, they should also be among the first to signal that the party is coming to an end.

On the flip side, the worst performing groups two years in a row are Gold and Silver. There are some preliminary signs, however, that there may be a turnaround in store for this group.

Currently, both gold and silver are testing the upper levels of their respective short-term downsloping channels. As long as gold manages to break outside that channel and stay above the 50% retracement level, we'll give it the benefit of the doubt, despite the fact that it will still remain within the confines of a larger downsloping channel:

Gold Daily Chart
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Silver is in a similar technical position, and the level to watch there is 20.70:

Silver Daily Chart
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George Krum

Author: George Krum

George Krum

George Krum is the author of the "CIT Dates" blog, and the following apps:

OddsTrader - combines the power of Hurst Channels with proper risk and position size management. For a web version see OT Signals below.

Gann 9 - the only financial app that allows users to effortlessly apply the legendary W.D. Gann's tools and methods for trading (including the Square of 9).

OT Trend - helps you quantify and forecast the seemingly random ebb and flow of stock, index or mutual fund movement.

OT Fibonacci - automates the process of applying Fibonacci numbers, ratios and time series to any security.

OT Seasonal - allows you to perform seasonal analysis on practically any security from around the world, and to build long-term forecasts and models.

OT Pairs - pairs trading, one of the most successful hedge fund trading strategies, is now available on your smart phone.

OT Pivots - combines the power of pivot lines with cycles to provide you with concise technical analysis and powerful trading signals.

OT Signals - a web app accessible from any browser, tablet or pc. It gives buy/sell/hold ratings for any instrument from around the world, and defines the trend and support/resistance levels.

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