Oct 5

Weekend Outlook for 7th October 2013 – Bears back in town – correction begun?

Markets had over the past few weeks a slow and steady decline. However I would admit we have not seen any “impulsive” decline and this could argue that 1730 was not a “major top” , however we had a lot of down days lately and we will find out in the coming weeks if 1730 was a major top or not.

So far my view is that 1730 was a major high – and one of the very good reasons is if we look at the DAILY and WEEKLY MACD , we actually got a very nasty tripple bearish divergence. That means SPX kept moving higher , but the MACD was not confirming it. This usually happends at major tops in markets.

Very short term everything suggest a possible rebound/bounce could occur – hard to say where but a rebound should occur before we go lower. So the thing to watch next is , IS IT IMPULSIVE of corrective bounce ? A break above 1715 area would suggest that new all time highs would be underway and as long we get a slow bounce higher to possible 1700-1710 , then we could see another very sharp sell off.

Nikkei looks like could see a mini crash in the coming weeks with the Yen exploding higher , this would suggest and hurt also the US and global markets and tell us another sharp sell off coming in US too after a possible rebound.

All in all – it seems like we might be ready for a much larger correction because of the very bearish divergence. Even so sentiment keeps being a bit too bullish in mkts. Last week bulls is 37% – neutral 32% and bearish 30%.

For now I’m just playing a bounce and if the bounce is going to be more than a bounce I will stay long. We need to be flexible and change strategy fast if the markets tells us so , but roadmap now is telling me that a major correction has begun. Targets would be possibly a 10% correction from 1730 which gives us a target around 1500-1600 on SPX.

In these times where we got lots of news , stay focused and be ready to change side. Its very news driven.

I remain very bullish on Gold/Silver – we saw a very good rebound in both gold and silver and if we see a “green week” for both gold and silver I believe we changed to upside and pullback done.

My first target on Gold was 1300$ ounce and we have been here in the past few weeks. Next upside targets is 1600-1700$ ounce.

If i’m wrong we need Gold to break below 1250 (to confirm) downside then we could see Gold a lot lower , but until then I stay with my bullish view on Gold.

TLT bonds looks bullish and I believe we have seen the lows for rest of this year in TLT (US bonds) , a breakout higher is soon underway and suggest also lower prices for stock markets.


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