The general market started the week off with a recovery from a sharp morning sell-off on Monday, but failed to build on that as it moved lower throughout the week into options expiration on Friday. Weak economic data and Fed meeting minutes that revealed an intention to taper before year-end on the part of most members sent the major market indexes moving lower into Thursday. The two-day rally off the intraday lows of Thursday morning has been more pronounced in the big-stock indexes while the broader market, as expressed by the NYSE Composite and small-cap Russell 2000 Indexes lags with both of those indexes still trading below their 50-day moving averages.
The Market Direction Model (MDM) remains on a BUY signal.Despite fears of Fed tapering, weak economic data prevailed in sending interest rates lower, with the 10-Year Treasury Yield ($TNX) holding near its recent lows and the 30-Year Treasury Yield ($TYX) making lower lows into the end of the week after running into resistance at its 50-day and 200-day moving averages.
Meanwhile, gold is holding up after the massive, flash crash style shakeout in gold futures last Sunday leading into Monday morning. Gold finished the week at $1784 an ounce, well above the prior $1750 support through which the yellow metal shook out last Sunday and Monday.
Interestingly, while gold has held its ground following last Sunday's big futures shakeout, gold mining and related stocks are getting pummeled.
Meanwhile, Bitcoin continues to rally on a wave of positive news. We reported two weeks ago on the pocket pivot along the 10-day moving average in the Grayscale Bitcoin Trust (GBTC) which occurred on a retest of a prior buyable gap-up move. GBTC has since moved higher, and successfully retested its 200-day moving average on Thursday.
Fears of a slowing economy as the surge of stimulus since the pandemics started last year begins to wear off took their toll on economically sensitive stocks like metals, materials, and industrials by the charts of the SPDR Select Sector Materials (XLB) and SPDR Select Sector Industrials (XLI) ETFs, for example, while technology, represented by the SPDR Select Sector Technology (XLK) ETF, rallied on the promise of lower rates. Note, however, that semiconductors as represented by the VanEck Vectors Semiconductor ETF (SMH) have been on a steady slide for the past three weeks despite continued talk of a semiconductor shortage in areas like the auto industry. Thus it is not so clear that Fed tapering talk in the meeting minutes released on Wednesday is really what the market is concerned with.
The action over the past week confirms our view that this is primarily a market for swing-traders and day-traders while very little in the way of intermediate-term to longer-term trends can be found. This is in turn confirmed by the fact that we continue to find nothing that fits the criteria necessary for inclusion on the VoSI Focus List, which remains the null set for now. Abstaining from trading when conditions are suboptimal is a key to keeping profits.