The paired trade of long metals and miners and short US equity indices should be a little clearer today. Yes it limits upside, but it certainly provides some comfort on these big down days, and provide some will to be able to add selectively to positions, or open new ones, on weakness.
So what next? Tomorrow is the Saudi 'day of rage' and I suspect the markets were due for a breather, and this provided an excellent reason for taking profits.
The drops in many of the key markets I watch were down to pivotal support areas especially in the SP 500, so we'll have to see which way it goes. If we break this pivot, I would be looking down to the 1250 level. I am not sure how far bullion would travel down this road once the initial liquidation is done.
I have clarified a possible bull pennant forming up on the March SP 500 futures and the associated pivot. The 50 DMA on the futures is around 1299 and so that must be watched closely.
