Market Summary

While the market has been in a strong uptrend and the Fed has started pumping money into the economy we are off the high of 1227.08 made on Nov. 5th and have made a series of lower highs and lower lows since that time. The market did find support on the 20 day moving average (blue line) Friday but closed below the 1200 mark and it appears the 1220 area is serving as resistance and a double top remembering the 1219.80 high made on April 26. What has really caused the market to pause has been the international news of a debt problem in Ireland and a rumor the Chinese will raise their interest rates to slow inflation and their overheated economy. The commodity markets took a tumble at that news as China is the main importer of raw materials and the Baltic Dry Index has shown signs of rolling over. As our market has made an extended rally off the August lows a correction here seems likely. The 38% Fibonacci retracement level is at 1155 and the 50% retracement level is 1133. Will we get there? We will just have to wait and see. Click on chart to enlarge.

While gold and the small cap index are still in the top positions for the year they are off their best levels. For the week only gasoline and the US Dollar were up with all the rest of the funds in the red. The Emerging market EEM and China FXI were off the most for the week. As a side note interest rates on the 10-Year US Treasury bond have started to rise and may be a harbinger of falling bond prices. These interest rates could be the canary in the coal mine so to speak. Click on table to enlarge.