Ready For Action - April 9, 2012

[Billy]

The market reaction to Good Friday’s jobs report leaves little meaning for giving much weight to any interpretation of Thursday’s GDX Money Flow. It was quiet and mildly negative but we can be sure it will be moving strongly this Monday. If it is to the downside, the oversold level at -1.45% will trigger a RT buy signal. Similarly, upside accumulation by large players needs to reach the average MF + porosity (0.117% today) to trigger a buy signal. In all other cases the RT model will stay in a short mode. The protection level for a buy signal at the average (+ porosity) will be a reversal below (average – porosity). There is no protection at a buy from oversold signal except for your own discretionary stop. As Pascal wrote in his GDX commentary today, we may soon adapt that buy-from-oversold rule for the RT system.

At this time of writing, gold futures are up and stock futures are down sharply. How will GDX behave under such conditions is hard to tell, but pre-market quotes in the major component stocks have a slightly bullish bias. We could see some very choppy intraday action and I would not rush on a first signal with more than a small position since we might experience a series of whipsaws before a clear sustained trend emerges.

However, I must stress that the multi-pivot outlook in case of a buy signal today is very positive. The first support cluster is one of the strongest one could dream of, including the Quarterly S1 (45.75), Semester S1 (44.77) and Yearly S1 (44.77). Its total strength of 24 is 4 times the strength of the first resistance cluster where only Monthly S1 (46.27) is significant and just above Thursday’s close. Technically, we are at an ideal spot for an upside reversal, but there’s no reason to rush aggressively before confirmation that we won’t be stuck first in a long lasting consolidation or, worst, in a complete collapse.

Once again, no tradable statistical edges could be found by the EOD GDX and IWM robots who will both stay in cash.
Billy