For stocks, the recovery off Friday's lows showed the bears that the bulls still rule the town. I would count this as strike one. The SPY chart shows remarkable strength. Still, the move is extended, sentiment is poor.
For bonds, it looks like TLT (chart2) is trying to find a bottom in the 90 range, after a sharp correction. I would prefer to be a buyer at slightly lower levels, and will continue to short any rallies.
For GLD (chart3), there are three failures at the highs, on declining momentum. That isn't good news, and the highs now represent significant resistance.
On a "third strike" for SPY, I will look for bearish plays. Right now, it is only strike one, and that may disappear if the bulls can make new highs on good volume. For bonds, the sentiment has turned, but so has the trend. The QE2 may mark historic highs in the bond market. The analogy is when central banks were selling gold, marking major all time lows in gold. Now, the Fed is buying bonds.
For gold, last year's 30% up move means that some digestion is likely. A continued strong up move after that kind of run tends to be unsustainable. A new base in the 1200 to 1400 level is one of the best scenarios for long term gold bulls.
Long GDX, GLD, TBT
Net neutral SPY
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