Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
After last week’s drubbing the S&P 500 has fallen to an area of confluence from which a bounce seems quite likely at some point over the coming days:
Click to enlarge
While a 30-50 point rally in the S&P could certainly materialize over the next couple of days, the damage inflicted across global markets is quite significant. The S&P 500 breached its 200-day moving average for the first time in 475 trading sessions and the Russell 2000 and DAX both completed major chart pattern tops:
S&P 500 breaks under its 200-day SMA for the first time in 475 trading sessions
A simple yet important indication that the trend is changing and a reminder that there is ample open space below….
Russell 2000 (IWM) completes 11-month top
The measured move target on this top are the summer 2013 lows (12-13% below current levels)
German DAX Composite completes head & shoulders top
Measured move target 12% lower
A typical scenario given the magnitude of these completed chart patterns would be for some further downside today and/or tomorrow resulting in a climax in bearish sentiment which in turn offers ripe conditions for a bear trap. The bear trap (short squeeze) rally will typically last 2-3 trading sessions before the primary trend (lower) reasserts itself and new lows are made.
A couple of things to watch for today. On Friday the equity put/call ratio spiked to .87 which is one of the first indications of retail investor fear we have seen during this pullback – a move above 1.00 would offer a high probability contrarian long signal for equities
The NYSE McClellan Oscillator (ratio adjusted) ended Friday at -61, historically this indicator has offered a good long signal for equities when it has fallen below -75 (-100 is an indication of an extremely oversold condition which we haven’t seen since June 2013)
