Yesterday was a huge day for markets, as what most people had anticipated as a “tapering” announcement coming from the Fed was 100% wrong. Going into the announcement, the consensus question wasn’t “Yes or no,” but rather “how much?” This caught many traders off guard, and markets soared to new all-time highs. The big winners yesterday were commodity-related names, as the lack of tapering caused a big swoon in the dollar, and contrarily a spike in commodities. Yesterday’s exuberance has waned for the time being, and markets are slightly lower today. The relative laggard on the session is the Russell 2000, which is lower by about 0.3%. The S&P 500 and Dow are both off by about 2%, while the Nasdaq is slightly positive today. Metals are trading near breakeven after yesterday’s big move higher, and bonds are lower by about 0.7%.
CHART OF THE DAY
Market Vectors Gold Miners ETF (GDX) – Gold miners were up sharply on yesterday’s news, and today have pulled back significantly. However, this move lower is currently near the 50-day moving average, which has been a key trendline for the ETF going back some time. Looking at a daily chart, you’ll notice a series of higher lows and higher highs, indicating a potential reversal of trend from the past year or so. Sentiment has become very bearish on the miners, and we could be setting up for a big move higher as those riding the trend lower could capitulate.
I like a long entry here with a stop on a close below $26.30. I would initially target a move to 30, with 32 as a stretch target.
WHAT I’M EXPECTING
I would look for a continued move lower off yesterday’s spike, but then the 1710 area on the S&P 500 should act as support and spark a bounce.