Wednesday, April 7, 2010

Market Overview

The Dow appears to have completed an impulsive advance, and should enter into an ABC correction knocking at least a few hundred points off and resetting the momentum and strength indicators to make way for another upward push.


The USD still appears to be in the early stages of an ABC correction of its own that should take it below the 79.00 mark on the index.  Gold and silver have still not rallied to a point where they rescind the bearish forecasts, however the break fo initial support lends more weight to the "shallower correction" theory and subsequent major leg-up to follow. 

Update:  Tuesday, April 13.

There is not much to add by way of new developments - markets continue to struggle higher on anemic volume and more anemic momentum indicators.

Silver's DSI reading is over 85% showing a major bullish bias to the white metal - while this ratio can hold over 90% for some time, extremely one-sided opinions on any asset can lead to swift and sharp corrections. 

The market is still due for a larger pullback which should erase at least 1/3 of its recent rally for the past 2 months.  Following that we should see another higher-high in the US markets which should mark a completed terminal pattern - I will be looking to various sentiment and momentum indicators as well as secondary indices for verification along the way to see where we are in the bigger picture.

Despite the markets up-day, the VIX was up 4% on the day, indicating a shaky psychological foundation for further rises.  Yesterday's gap-down could be an exhaustion gap on the VIX, and the index should turn up as markets turn down for a few weeks.  If one wanted to play a short-term short, one could, however an equally good play is to keep cash at hand and take a swing long position once a nice ABC correction has played out in the broad indices. 

As for precious metals, the continued rise puts more weight on the bullish case for gold and silver, however the glaring non-confirmation in price from December still points to a longer-term bear market in the metals, and with deflationary forces due to crescendo again, that scenario may very well play out.  Despite that, the USD's correction looks underway, with minor potential for a rise above recent highs in the USD index.  A decline to below the 79.50 mark is a minimum corrective target, with the 78.60 mark being an ideal point to reset momentum and shake up short term psychology.

Next post I will show updated charts on the precious metals, Dow/S&P500, and any other assets currently of note.

Have a great Wednesday tomorrow!