Stock Market Continues Fall; Time to Buy Bonds and Gold

NEW YORK (TheStreet) -- The stock indexes finished off of their lows of the day with a good amount of selling across the board on Friday with increased downside volume.

The DJIA closed down 61.49 points to 16987.51 after being down over 100 points earlier in the day. The S&P 500 lost 11.91 to close at 1985.54. The Nasdaq was lower by 24.21 at 4567.59 and the Russell 2000 was down 1%, losing 11.74 to finish at 1160.61. The Russell 2000 is once again negative in 2014.

As I have mentioned before, volume decelerates on up days and accelerates on down days. The S&P 500 Trust Series ETF (SPY) volume came in over 117 million shares traded on Friday, over 50 million more shares traded versus Thursday.

My internal S&P 500 daily trading range for Friday was Buy Trade: 1982 and Sell Trade: 2001. The actual low for the S&P was 1980.26 and the high for the day was 1996.74. In other words, the S&P bounced higher off of the buy signal and went lower off of the sell signal on Friday. I do not use the old Wall Street indicators such as moving averages.

I expect both the bond market and gold market to move higher next week. Both the Barclays 7-10 Year Treasury Bond Fund (IEF) and the Barclays 20+ Year Treasury Bond Fund (TLT) are approaching extraordinarily oversold signals, according to my algorithm process.

Thus, the game plan for next week is to buy bonds and gold along with oversold stocks. The stock market should move higher by mid-week.

On Friday, I added to my existing Invensense (INVN) and started a new long position in Peabody Energy (BTU) on an extraordinarily oversold signal.

At the time of publication, the author was long INVN, BTU and AUY, although positions may change at any time.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

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