When we left last week, I discussed the low percentage of selling a market where the ten day RSI was in the 25 area. That low reading can be worn away with some two sideways action and that is exactly what I expect to start the week. We made a slightly higher high on Friday above the Thursday rally high. Now I think we can expect to test or break last week’s lows. And then come back to test last week’s high again. So it’s a week to get in and get out and not look for home runs.
I do have two very interesting situations here. The first is Newmont mining that is tracing out a very classic bottom pattern. This pattern consists of a very choppy decline with the decline punctuated by solid rallies. Eventually though the buyers give up, the sellers capitulate, and we get an acceleration into new lows. That is all very clear to see on the attached weekly chart. The acceleration lower is key. The stock is down 10% in recent days. That capitulation at new lows after the extended decline, several failed attempts by the bottom pickers, most often is precursor to a good rally. I expect a rally is imminent in NEM. It closed at $36.95. It is an intermediate term play.
The second situation is one of my favorite stocks, JPM. It looked bullish Thursday but completely reversed that on Friday as the attached daily chart shows. It’s getting ready to move and shaking the tree on both bulls and bears first. Will monitor this one closely for the true opportunity.