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Tuesday, February 8, 2011

Melt Up

 Another melt up on even lower volume. We have two technical indicators getting ready for a shoving match: RSI is again over 70, a point at which, at least recently, it has pulled back, albeit not by much; and MACD, which has stopped it's month long descent and is on a fresh buy signal. We will probably get a nominal pullback soon, but maybe not before we hit the ultimate target here, 1330. Enough people have been made fools of by calling tops in the last year to convince me not to call it  top, just to expect some downside from there. 
 I have been pointing out the bullish flag in the TNX for some time now, and it finally broke out of it last week, and followed through on a big move today thanks to a really lousy 3 year auction.  This should hit 39 without too much trouble, and I doubt it stops there for long. Bernanke opened a can of worms with QE2, and now he gets to meet the bond vigilantes.

 Crude oil teased us with a potential breakout past 93, but the move was V shaped, and resulted in a sudden drop. 85 is the low end here, let's see if it can hold that. If not, the 200dema is rising up to meet it, and we could have a test there.  The failure to get past 93 is not bullish in the least, but if it an keep from going to a lower low, it might make another attempt.

The Dollar index is in the process of completing a dead cat bounce which brought it back up to the descending 20dema, where failed.  It has a minor pivot point at 77.5 which might hold it, but I doubt it. I suspect that at some point this is going to have to retest the November low.

Calls for the demise of the precious metals market were a but premature, as silver, which is substantially out performing gold, has come back nicely. This is leading the silver stocks, which may really start sceaming again if this breaks out, and by all indications, it sure looks like it will.

Bernanke's failure to keep bond yields in check is going to prove to be the undoing of Quantitative Easing. It's going to get harder and harder to tell us with a straight face that there is no inflation when interest rates, food prices, and gasoline are going through the roof.

I will have the new highs update shortly.

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