The light volume made today's rally unconvincing. In the face of new terror woes, it felt good to move upward. However, don't be distracted: the market remains weak. Several things happened today that confirm this. For starters, the NASDAQ was turned away at its 13-day. Even more disturbing was that although breadth was positive, new lows overwhelmed new highs 202-37. We put in both a lower low AND a lower high today, adding to that bearish arch since the July low. Finally, the fundamental leadership was very quiet today. Most of the buying was in trendy, newsy issues. For example, the thought of reduced global mobility caused a 3.1% decline in crude. This was a welcome breath of fresh air for consumer stocks, and retail, entertainment and restaurants did well today. But these are beaten down groups. Value buyers picked at industrials and tech as well.
In a move that seemed almost counterintuitive, the terror story took another prisoner today: gold. It fell for two reasons, both related to Heathrow. Crude's tumble took the wind out of inflation fears, which hurt gold's appeal. The second thorn was the strength in the dollar. Recently, bad global news has repeatedly sent foreign investors scrambling for the safety of the dollar. Today was one of those days, and gold felt the neglect.
The gold chart is definitely getting interesting, and the fat lady awaits just offstage. Healthy markets are led by growth stocks, not commodities. A decline in commodity prices is a necessary step in the economic healing process, though we may not be there yet. No need to rush into anything. The pros see little reason to buy at these levels -- they want real bargains. Stay defensive. best dk