• The good news: Most of the major indices have closed on Friday at all time or multi-year highs.
  • SPX has “shored up the structure” of the breakout of the December high. The next resistance is located at the trend line that connects the highs of July-November and December. Next week this trend line will stand at 2132 (21.5 handles above Friday´s eod print)
  • Friday´s candlestick is a Hanging Man. Although a pullback is probable I will not adopt a bearish stance as long as bears are not able to break with authority 2093 (Previous resistance which is now the support)

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Monthly time frame:

• After a steep decline from December 1979 to the low reached on March 1985 price has formed a rising channel
• Time wise there is a similarity in the length of the moves:
  • Decline from December 1979 to the bottom of March 1985 = 6 years and 3 months
  • Advance from the March 1985 bottom to the top of September 1992 = 7 years and 6 months
  • Decline from the September 1992 top to the October 2000 bottom = 8 years and 1 month
  • Advance from the October 2000 bottom to the July 2008 top = 7 years and 9 months
  • So far the decline from the July 2008 top = 6 years and 7 months
• It seems probable that price is attempting to establish at least a short-term bottom at the trend line that connects the June 1989 with the August 1997 lows, which coincides with the 0.618 retracement of the rally from the October 2000 low to the top reached on July 2008

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1. GDX (Gold MIners ETF): Long set up review

• I am already long. I am planning a secondary buy

Weekly time frame:

• I keep thinking that the advance from the November low should have more business to the upside, maybe with a Double Zig Zag
• Price has reached the 0.5 retracement (A potential spot for a bottom)
• A bottom will most likely be confirmed once the gap at 21.55 is closed
• Stochastic (5,1) is reversing from oversold territory (It should strengthen a bullish scenario)

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Author: Urban Carmel

Every month, we review the latest BAML survey of global fund managers. Among the various ways of measuring investor sentiment, this is one of the better ones as the results reflect how managers are allocated in various asset classes. These managers oversee a combined $700b in assets.

The data should be viewed mostly from a contrarian perspective; that is, when equities fall in price, allocations to cash go higher and allocations to equities go lower as investors become bearish, setting up a buy signal. When prices rise, the opposite occurs, setting up a sell signal.

To this end, fund managers became very bullish in July, September, November and December, and stocks have subsequently sold off each time. Contrariwise, there were some relative bearish extremes reached in August and October to set up new rallies. We did a recap of this pattern in December (post).