Market Summary

Another good week in the markets, but we are fairly overextended. This has been six weeks in a row now the markets have been up and we are due for a pull back. We have had the best rally in 76 years comparatively speaking off the March 9 lows. The S&P500 is up 30% and the Dow is up 25%, the NASDAQ is up 32%, and the Emerging Markets are up 40% off the lows. Since the markets move together they form similar chart patterns and now we have a rising wedge formation which is bearish and indicates a move to the down side in the markets once the bottom support line has been broken. While I can not say for sure, that move to the down side could occur next week.

The Russell 2000 small cap index was the best performer last week up 2.39%. The worst performers were the commodities with oil down 4% and gold down 1.26%. If we have a big move to the down side in the other markets gold could rally. GLD is currently resting on top of its 200 day moving average. Click on table to enlarge.

We have added another sector to the upside from last week and now have 3 sectors in the green. Click on graph to enlarge.

As I mentioned we have a rising wedge formation chart pattern which portends of a correction to the downside in the market. We are at a critical place in the market at the apex of a triangle where it will either have to break out to the upside if the rally is to continue or break down. A breakout above 885 and the next target would be in the area of 943. The more likely scenario would be a break down to the downside. A break below 850 or lower and the next target would be the 790 area, then 775, and 750. Click on chart to enlarge.

Note that since markets move together we can get feedback from the other markets as well. When the generals are starting to roll over the market is likely going to follow them down. Remember, markets go up three steps and come back two steps. A break in the Dow below 7960 and the next target in the Dow would be the 7500 area. Many of the markets are up against their 200 day moving averages which is overhead resistance and a place from where they are likely to bounce off of. Other markets up against or near their 200 day moving averages I am following include $HGX, $NDX, $SOX, $TYX, $XAL, $XAU, $XBD, AAPL, EEM, EWH, EWZ, FSAGX, FXJ, GLD, GS, INTC, NEM, PTR, QQQQ, RTH, RYL, S, XLK, XLY, and XRT.