I’m not sure what it was the market objected to during Yellen’s press conference but by the end of the day the S&P had bounced off the 1850 support and recovered about half of today’s decline. With options expiration on Friday I have to think this market probably isn’t quite ready to roll over into it’s daily cycle decline just yet.
That being said I have no desire to try and catch a few more points only to have them taken right back away when the DCL begins.
So for now I’m going to stay in cash in the stock portfolio until stocks drop down into their next DCL. Once that move becomes clear then we will try to spot the bottom and re-enter stock positions as close to the bottom of the DCL as we can.
Nothing happening today that we didn’t already expect. Since we didn’t get the reversal candle we now have to wait through Thursday, and probably Friday’s options expiration and see if gold can hang on and hold above the intermediate trend line.
If gold does break through that level then we will sell the rest of our positions into the next bounce and go to the sidelines for the next couple of months as the metals would likely become extremely choppy and volatile. Not the kind of market that either bulls or bears can make money in. I certainly would have no desire to try and trade the metals in that environment. If this comes to pass I would suggest folks migrate most of their capital to one of the other portfolios and give the metals a break until May or June.
On the other hand if gold completes a swing above the trend line, and a strong move back toward the recent highs ensues then I will look to add exposure to the metal portfolio for one more leg up in this intermediate cycle.
For now though there is nothing to do until gold forms a swing.
Finally we come to the dollar. This one is a puzzle. On one hand today’s rally did break the intermediate trend line. It’s late enough in the intermediate cycle that this could end up being a final ICL, and the trend line break would suggest that may be the case.
However that would also require us to count two short daily cycles in a row. The previous cycle bottomed on day 17 and this one on day 16. Two short cycles in a row would be very unusual. Usually a short cycle is followed by a stretched cycle.
So what I’m wondering is will the dollar roll over again quickly and give us one more short cycle with a final bottom around April 4 on the next employment report?
We’ll just have to see what transpires tomorrow and Friday before we can make a call on the dollar.