First of all, the swing at the bottom was extremely powerful. Second, after a day of mild consolidation, market just slashed through the MA50 on huge volume, closing at the high of the day. This is the basic definition of a follow through day, that often starts a new uptrend. And third, market was able to keep the high levels for the rest of the week, confirming the follow through day.
However, my scepticism still prevents me from announcing a buy signal. A really huge volume on indices is usually not a good sign. Often such too-good-to-be-true-looking FTDs will fail two to five days later. And we are officially still in a bear market. I just don't think that bullish sentiment has been cleared enough to pave the way for new bull market. So, for now stock market will stay in neutral mode. Things should get clearer by the end of the next week. If MA50 stays and maybe even MA200 gets conquered I will start to believe that the bear is at least temporarily over. And I mean temporarily. The biggest problem right now is the leadership. There are virtually no constructive bases in big cap leaders seen at the moment, which means that chances for a sustainable, many month rally, are low. Indexes are being pushed up by oversold stocks, which is usually not a good sign.
Moving forward to gold. I guess we now have a confirmation that many investors see the same picture as we do. Yesterday gold tagged the descending trendline perfectly, sold off a little bit, but stayed mostly neutral for the rest of the day. I suppose this is a bullish sign. A partial retrace-consolidation just below the trendline would set gold, silver and mining stocks for a powerful breakout. I'm starting to lean to the bullish side. The fact that gold is probing resistance levels and not selling off probably means the sellers have been exhausted. If price breaks above yesterday's high, I will definitely buy a stake in precious metals and proclaim a buy signal.
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