The sequester came and went. The relatively insignificant $44 billion in cuts in 2013 federal spending did little to upset the markets. As we've reported, it was more of a battle of posturing between the two sides. Futures are down this morning after China's Shanghai index plunged -3.65% following the introduction of new property tightening measures. If markets are to trend higher from here, we would like to see a follow through day accompanied by constructive action on the part of leading stocks. So far, this seems somewhat unlikely given prior price/volume action. Nevertheless, the Market Direction Model, which is currently on a sell signal, does not predict market outcomes but continues to take in and evaluate the market data in real-time, as it is not biased toward the bullish or bearish side but looks to find the right side of the market. As well, QEternity may put a floor under the markets as it has in the past, enabling markets to find their footing and move higher from here. Thus the action over the next several days may be key in determining the market's next trend. Pending further evidence, we currently remain cautious on the market and would not be seeking to initiate long positions until a follow-through is forthcoming.
In economic news, the Institute for Supply Management manufacturing index for February and the University of Michigan consumer confidence gauge were stronger than expected, but construction spending for January and personal income both missed expectations. These had a minimal effect, if any, on the markets
Apple (AAPL) hit new lows on higher volume as it broke down from a "mini" head and shoulders type of formation as we discussed in last week's Short-Sale Set-Up reports. AAPL remains in a downtrend until further notice, and Friday's downside "breakout" fails back to the upside, our longer-term price target for the stock lies in the 360 price area around the lows of the stock's basing formation from late 2011.
Short interest in gold has reached record levels, according to a recent "Commitments of Traders" report put out by the U.S. Commodity Futures Trading Commission released last week. As gold flirts with 17-month support levels this maybe one factor that helps to put a floor under the yellow metal as bearishness in the precious metals reaches a crescendo.