Looks Like a Buying Opportunity

by JDH on February 10, 2018

Nice two weeks on the markets, eh?  The DOW touched 23,360 on Friday, pulling it all the way back to where it was on November 20, 2017.  The “crash” has wiped out all of the gains over the last two and a half months.

Is two and a half months of crash really a crash?  Technically going from 26,000 to 23,000 is 3,000 points, or 11%, so it’s certainly a correction, but with the market so extended beforehand, it can certainly be argued that this is just a necessary pause.

The Dow is not yet down to either it’s 200 day moving average, or the blue uptrend line (see chart), so it’s not yet a crash.  The relative strength index at 35 looks like a great buying opportunity.

The old Fed lady is gone, and the new Fed guy is in, so presumably the new guy will do what every other Fed guy does, and start printing money, which will find it’s way to the stock market.  The Big Boys got to unload their stocks at the top, and now they can start buying again with stocks on sale, so if I had to guess, I would bet on much higher prices ahead.

Am I buying?  Not yet.  I may take a small position on Monday, perhaps with some out of the money options.  For now, I’m on the sidelines.  I’m in no hurry.

Gold

And what about gold?

An interesting conundrum, since the chart shows both a double top (off the September and January highs), and a double bottom (January and February), so this could go either way.

If gold trades below $1,300, we could easily see $1,240.  I’m betting that we won’t see those levels, and support will be found at the 50 day moving average around $1,304, so now is the time to go long.

However, I’m not betting the farm on it, since in these crazy times, who knows.

It appears that under President Trump peace is breaking out all over the world, particularly in North and South Korea, so perhaps that will be bad for gold.  Or, it may lead to prosperity and inflation, which may be good for gold.  I don’t know.

I’ll maintain a small position, and keep my powder dry, for now.

More next week (if I survive the snow).