Markets have shaken off yesterday’s weakness, and are currently trading near their highs of the session. This morning saw some weakness in the indexes, but the dip was bought. The story continues to be how relatively strong small-cap stocks have been, as the Russell 2000 is again making new all-time highs today despite some lag in other indexes. For the day, the Russell 2000 is leading, higher by nearly 1% on the session. The Dow is today’s relative laggard, up a paltry 0.2%. Despite the bid in stocks, other asset classes are seeing money flow as well. Bonds are up sharply today, about 0.8% above yesterday’s closing price. Metals are fairly strong as well, as silver is up near 1% for the session, and gold is 0.1% higher.
CHART OF THE DAY
Barrick Gold (ABX) – The miner has been relatively weak this year, but there are some signs of life. In fact, the shares have made a series of higher highs and higher lows since July, indicating that a potential trend reversal is in place. ABX has been guided by its 50-day moving average for some time, and the shares are now pulling back to that upsloping trendline. This could be an indication of support going forward, and offers a nice low-risk entry from the long side. Sentiment toward the equity is currently very bearish. In fact, option sentiment is currently at the most bearish level seen over the course of the past 52 weeks. Should ABX gain some footing here, this creates the potential for a bullish unwinding of these bets.
I like a long entry here with a stop on a close below 18. I would initially target a move to 20, with 22 as a stretch target.
WHAT I’M EXPECTING
Bulls held their ground today, and I’m looking for a move back to the recent all-time highs on the S&P 500. The trend remains intact, and we appear ready to make new highs. The risk to the market right now is the upcoming debt ceiling debate in the U.S., which is set to crescendo on October 1. Keep an eye on any developments on that front.