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Tuesday, October 25, 2011

More Resistance

As overbought as the market was getting, a pullback would not be a surprise today, but this was more than a pullbak. Volume, as of now, is probably just barely low enough to prevent a distribution day, but I expect it to be revised up later. MACD histogram continues it's slow slide, indicating the market has been losing momentum. The next price congestion zone begins at 1260, and that ius where we started encountering resistance. It wasn't so much heavy selling, just a lak of buying. It is a pretty ugly candle, and could mean some more down side to come, but it does not look like a severe drop is yet in the cards. So far, the market is bending, not breaking.

 Anybody shorting oil is getting smoked. This has shot up right through a resistance level around 90, and could very well test 100 very soon. I have the price relative line with BNO, the ETF that tracks brent crude. This has been in a severe divergence with Brent for several months, a condition I did not expect to last much longe. It appears to be catching up now, as the line is rising rapidly. that means this will go higher even if Brent doesn't budge. 
When gold was holding support, I though it was just a matter of time before it shot p to do some upside testing. That started today, and I think 1800 is a reasonable target here. I don;t expect it to break out to new highs for a few more months, unless somebody big goes down, or unless Bernanke finds the switch to the printing press again.
Treasury yields made the biggest move in a couple of weeks, and it was down. This has been cautiously bullish since October 4th, but may now be in flight to safety mode again. 

Once again the dollar index chart was not updated in time for this post, so i had to go with UUP. Just as last week UUP looked more bearish than the dollar index, this week it does as well, being well below the 200dema, while the dollar index was above it until yesterday. This is now sitting right on a support level, and wiull probably get at least a bounce here.

The market was due for a drop, and while volume was probably enough to chalk up a distribution day, it wasn;t high enough to really be concerned about. I am more concerned that the market got cheesed, but oil and gold shot higher. Something is up here, and it probably isn;t going to be pleasant.

I will have the new highs update shortly.

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