IWM is stabilizing around Monthly S1 (78.41) and closed less than 1 ATR away from our short entry limit of 79.81.
Today’s speech by Bernanke could fuel the awaited bounce and IWM could hit our short limit. If that’s the case, be aware that the market is following closely its seasonal pattern of the democratic presidential election cycle. That cycle is in its very last days of a correction before staging a strong rally. The nice correlation YTD with the pattern is troublesome enough to think twice before shorting aggressively here with large position sizes or leverage.
GDX staged a spectacular key reversal day with a pocket pivot volume signature. It closed above the 4-day VWAP, rewarding the average buyer of the last sessions selloff. The Precious Metals MF literally jumped to a mid-morning buy signal after GDX opened at a new 2-year low. Such a massive institutional commitment is exactly what’s needed to facilitate a forthcoming breakout above the strong first resistance cluster including Yearly and Semester S1 (44.77). The GDX robot will stay in cash due to the lack of ST/LT settings edges.
For RT model traders, today’s porosity is 0.122%. The buy signal is protected by the MF hitting -0.122%. Personally, I feel that if this is more than a short squeeze and the real start of a rally, upside follow-through should come quickly. It would be abnormal for GDX to trade much below the daily pivot (42.58) and Wednesday’s VWAP (42.54) and it is the area where I’ll keep an EOD stop.
Billy
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