See charts below with an On Balance Volume indicator and the Money Flow Indicator using a 13 period
Looks like I jinxed the market saying last week it looked over bought with the 13 period MFI at the top range of the chart. The market is nervous at the moment, interests rates , inflation, sell in May cyclical theory, low growth, strained consumers etc. The market does climb a wall of worry so it's all nothing new. However the chart above still looks healthy IMO. It could correct down a bit more but until price and volume break down more - I see last weeks price action as a normal correction after 4 strong weeks.
I notice this week the 300-500 has generated four 52WH signals and the top 300 just two. Is this a sign that the market is rotating into the smaller caps? If so its a good sign and indicates market breadth.
Last week I said I had a flat week. This week my portfolio did well on the back of gold stocks, although the rally faded late in the week and it remains to be seen what happens this coming week. Actually, looking at long term charts of the US GDX and the Aussie XGD (the gold sectors for US and Aus) I have doubts as to the longevity of the gold stock rally (for the time being) The hype in the sector is often a warning sign that a correction is near. Lets hope I am not jinxing all those gold stock holders out there!
Looking at the Monthly chart of the GDX below I would like to see more volume. May is nearly over, the volume is down a lot compared to April and next week in the US is only a 4 day trading week because of Memorial day on Monday. The OBV is hitting overhead resistance and the 3 period (3 months) MFI is at the top of its range. There is no doubt price is in an uptrend, but to make the price continue its uptrend it needs more love, and the language of love in the markets is money - volume.
Perhaps fund managers will support the gold indexes with the end of month shenanigans that sometimes happens...........
Until next week
Peter
