Let's take a look at the intermediate and long term trends - as defined by the 50, 150 and 200-day simple moving averages - in various indexes, commodities, currencies and bonds.
Indexes
Without question the intermediate term trend remains up in all indexes - international and non. However, Asian markets seem to be displaying relative weakness.
$SPX
$CZH
Nonetheless, the intermediate trend remains sideways-to-up at a very minimum. When the larger moving averages in the US markets begin to rollover or even flatten out that is when things will turn very, very cautious.
Commodities
I exited 100% of my gold stocks on January 13, 2010 and it seems my timing could not have been better. I suspect that $GOLD is setting up for a significant correction that could surprise many gold bugs. However, just like the indexes the intermediate term trend remains bullish. Ditto for crude oil.
$GOLD
$WTIC
Bonds
While today has all the hallmarks of a liquidation day (see VIDEO), the intermediate term (down)trend has not changed in the bond market.
TLT
Likewise, interest rates continue to move up.
$TNX
Currencies
Everyone and their bad-ass uncle knows that the $USD is in severe doo-doo. However, it seems to have picked up a bid in the past day or two. This has had a very negative effect on the Euro.
$USD
$XEU
So what does all this mean?
The short answer is "Not a whole lot." If 2008/2009 was any indication to follow the primary trend then let's make the effort to practice that going forward. I will say, however, that the movements in the currency markets and today's big run-up in bonds is something to keep an eye on over the very short term.
Whether THE top is in is completely irrelevant to me. If there is a 2nd lesson to have learned in 2008/2009 it is to have not tried to call tops/bottoms every 2nd day. As a trader you need to not only appreciate that fact but also incorporate it into your trading psyche.
VOLATILITY
Daily volatility has picked up which is a great sign that what we saw in December and early parts of January was simply a spill over effect from the holiday season - at least I hope it was!
Daily Volatility
Meanwhile, the VIX/VXV ratio continues to make higher lows and broke above - albeit closed below - the 0.875 level that has typically acted as support.
VIX/VXV Ratio
To my mind, all this means is that people are finally considering hedging their bets via short term puts. I don't think it necessarily means that a major top is in but it is noteworthy.
All-in-all the big picture has not changed. I expect a pullback into February/March so short deltas are advised. Short term, however, I am bullish.
Here is the forecast...
Intraday ES Forecast
