Today, the SPY touched another high and HYG made a lower close producing a five-day divergence. The 21-day moving average of the Equity Put/Call ratio fell below .62 and in an area where the market had trouble over the last year. The next week is option expiration week and the week before can produce whipsaws and one appears to be e setup up now. The trend is up (identified with RSI>50 and McClellan Oscillator >0) but there are short-term cracks in the rally showing up. Last Friday, the market fell intraday 1.8% and then closed on high volume. Last Friday’s high volume low could be tested before heading higher.
On November 9 and last Friday had the same big jumps in Volume suggesting that “Selling Climax” has occurred. Most of “Selling Climax” lows are tested and if tested on lighter Volume it would suggest support. This is the week before Option Expiration in which whipsaws are common. A bullish setup may occur on a test of Last Friday’s low (near 260 on the SPY) on lighter volume and there could be panic readings in the Tick and Trin. December is still expected to be up and if there is a correction, it could develop a short-term a bullish setup.
The COT Commercials bumped their short position again last week to 247K up from 225K the week before and still remain bearish. The second and third window from the bottom are the Up/Down Volume and Advance/Decline indicators which both are less than “0” and bearish for GDX. The top window is the RSI for GDX which is less than 50 and that is another bearish sign for GDX.GDX/GLD ratio which broke to a new three-month low with lGDX leading to the downside. We should start to see strength in GDX/GLD ratio compared to GDX near the next low and so far that is not showing up here.
