It isn't too surprising that the big opening gap is being sold so far. Market players have been punished badly the last couple weeks and when they have the opportunity to escape some positions with decreased losses, they are going to take it. That is what overhead resistance is all about and we have plenty of it now.
We are still seeing pretty good point gains and better than 4-to-1 positive breadth, but we now need to see the dip-buyers to give some support. If we see red today, it is going to really undermine any fragile confidence this bounce is generating.
Ideally, the bulls need to take out those opening highs. That is where the shorts will set their stops and where the momentum buyers will do some chasing. Right now, I'm not very optimistic that the market will be able to make it as trading is pretty heavy so far.
As this market has been such a mess lately, I don't have much on my radar. One area I'm focusing on right now is gold and silver miners. The miners have been underperforming the metals lately and I think they may close that gap. In fact, short SPDR Gold Trust (GLD) and long Market Vectors Gold Miners ETF (GDX) is a paired trade I'm considering.
One way or another, I'm looking for miners to play some catch-up. They obviously are going to have some big numbers if gold prices hold. Plus, indications are that even if GLD does cool off, the average price of gold is going to substantially higher.
My favorite gold mining play right now is Richmont Mines (RIC), which is my stock of the week. It has good reserves and the chart is a pretty classic looking cup-and-handle pattern. I added some share to my position this morning.
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