Gold Stocks Rise From The Ashes

Charts courtesy stockcharts.com

Gold stocks appear to finally be moving off of a major bottom across the entire sector.  Price momentum divergence, money flow and volume are all looking very positive.  With the whole sector down > 50% from top to bottom, this could be a major rebound.

Facebook Explodes Higher On Very Heavy Volume

Facebook has exploded, up almost 28% today on VERY heavy volume.  There are days when the entire Toronto Stock Exchange trades less than half of the volume Facebook has traded today (and the day is not over).  LinkedIn is up strongly in sympathy.  QQQ and especially FDN are up as a result.(Disclaimer:  I own FDN and QQQ)

Market Finishes Strong

The market continued to build on higher volume today straight into the finish. Small caps, transports, materials and energy were in the lead with defensive sectors lagging the market. Today was a positive day all around.

Several emerging market ETFs made great gains on high volume. The iShares MSCI Malaysia Index (EWM) posted new 52-week highs.

Treasuries and Bonds not so safe

Volume is up huge and climbing on the major US indicies today after the Bernake comments and the quarterly GDP report.

I'm sure the bears will suggest this is simply short covering and that we should expect new lows. I'm not so sure. Bonds prices and treasury yields are down on huge volume today. We may be observing the formation of a long term double bottom in treasury yields which could hold for years. The iShares 20-year Treasury Bond ETF (TLT) is essentially the inverse of the 10-year treasury yield chart. Long term bond prices attempting to retest of their multiyear highs in classic long term double top formation.

The above charts illustrates how fear drives cash to safety in panic driven fashion. When fear subsides and normalcy returns, money flows out of these "safe" investments in an equally rapid nature.

Declining Volume

Although not illustrated particularly well in the above chart, it would seem that volume has declined on the S&P 500 and the other major indicies since the initial spike in volatility around the period of the flash crash. As I mentioned in a previous post, the market is trading in an apathetic fashion with little conviction in either direction. Volume has been very low in general, declining with each successive leg down since the end of April. Consequently, I'm not convinced we're going directly into the abyss as the daily headlines would suggest. I think, September will be an interesting month for the market.

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Thanks,

Shawn