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.

Market Summary

It has been a very good week in the markets as this bullish rally continues. We broke out above the April 2010 highs with strength as the Fed announced its monetary policy of a 600 billion dollar stimulus and the Republicans gained control of the House. As can be seen on the daily chart of the S&P 500 below we are breaking out above former highs and are likely to go higher. Click on chart to enlarge.

When a daily chart high is taken out we must look to a larger time frame on a weekly chart for the next level of resistance. As can be seen on the weekly chart of the S&P 500 below the next level of resistance is the 1300 mark. What is interesting on the chart below is the formations of a huge cup and handle formation as well as an inverted head and shoulders formation. Both these would indicate we are going higher with the inverted head and shoulders formation pointing to a target in the 1430 range. As I mentioned two weeks ago the current rally occurred after the Fed speech Ben Bernanke gave August 27, 2010 and it is clear that monetary policy is moving the markets higher. With the flow of money being printed by the Fed it is likely we will go higher but it is also likely we will get inflation. Commodity prices have soared and are the place to be to take advantage of this situation. Rising lumber prices indicate rising housing price about a year down the road. China is the beneficiary of a strong US economy however they are raising their interest rates as we are lowering ours strengthening their currency as we weaken ours. Inflation of prices without wage inflation, which has been flat for 30 years, is likely to put strain on consumers. How all this plays out we will just have to wait and see.

As can be seen on the table below a majority of the funds are green in the YTD column. That is a good sign. Gold and the small cap index continue to top the list for the year. For the week, oil and China made the best gains. Click on table to enlarge.

Market Summary

Last Monday the market reach 1196 which is close enough to the 1200 mark to qualify for reaching my target. The question remains was that the high for the current rally? News will drive this market which has been going sideways with many daily dojis. The statement of the FOMC meeting scheduled for Nov. 2-3 and the results of the election as well as two unemployment reports are due next week. I would consider a correction to begin with a close below the 1170 mark. A correction, however, may be good for the market. The falling dollar and rising inflation will help push the market higher. Note the "Golden Cross" where the 50 day moving average crossed above the 200 day moving average at approximately 1122. Click on chart to enlarge.

Gold, the small cap index, and the Nasdaq are the top three in the table below for the year. What is interesting is that the natural gas ETF UNG did the best for the week up 9% but has done worst for the year down -45%. When markets turn what was going down starts going up and what was going up starts going down. Click on table to enlarge.

Market Summary

Market direction continues to go up while the Volatility Index ($VIX) continues down and the next target for the market is the 1200 mark on the S&P 500. Anticipation of the second round of Quantitative Easing (QE2) seems to be driving the market higher and began after Ben Bernanke gave a speech August 27, 2010 that can be found HERE. The next meeting of the FOMC scheduled for Nov. 2-3 should be pivotal in this market as the Fed gives further guidance on its monetary policy. What is interesting is that the US Dollar, which began a decline around the same time as the speech referenced above was also the same time that the stock market began its most recent rally. Clearly monetary policy is affecting the market and responsible, at least in part, for the rally. Click on the chart to enlarge.

While gold remains up the most for the YTD period it has come off its highs and the Russell small cap index, up the second most for the year, was relatively flat for the week as were most of the other markets. Of note then for the week are the decliners of greater than 1% which includes FXI, EEM, GLD, and UNG. China raised its key interest rate last week and raised capital requirements at banks. China's GDP grew 9.6% from a year earlier in the third quarter, slowing from the 10.3% rise in the second quarter. Click on table to enlarge.

Market Summary

As can be seen on the chart of the S&P500 below we have broken out above the 1170 resistance level which should now act as support. The next level to the upside is the 1200 mark. However, should the market turn lower we have support at the prior area of support/resistance at 1150. The financial sector (XLF)has taken a hit with the freeze on foreclosures and the Bank Index($BKX) has sold off hard the last three days. Technology, on the other hand, has done well up a similar amount to what the financial sector is down. This could be a turning point or simply an area of consolidation. We will just have to wait and see. Click on chart to enlarge.

Gold continues to outperform up nearly 22% for the year. For the week the China market per the FXI was up the most up over 4%. Click on table to enlarge.

Market Summary

Last week was a very good week in the markets and a continuation of the uptrend that began in September. And while September and October are historically the weakest months of the year in the markets the announcement that the Fed will begin another round of Quantitative Easing (QE2) to stimulate the economy has meant that good news is good news and bad news is good news. The worse than expected jobs data released Friday then became good news to continue the rally. The next FOMC meeting is set for Nov. 2-3 and the market is already pricing in an announcement of further stimulus which if it does not get could be cause for a downturn.

The chart below of the S&P 500 shows that we are approaching the next level of resistance at 1170 which we should reach. After that I would say the areas of resistance are the round number 1200 and then the April high in the area of 1220. It is interesting to note that the $VIX again broke below two standard deviations of its 20-period moving average today which has in the past been a sell signal for the market approximately a week later. Will it happen this time we will just have to wait and see. Click on image to enlarge.

The table below shows that gold has outperformed this year up nearly 20% followed by the emerging market ETF EEM up 8.24%. For the week gold was up 2.13% followed by the EEM up 1.76% and the small cap index up 1.20%. Click on table to enlarge.

Market Summary

As can be seen from the chart below we were not able to maintain a closing price above the 1150 level which is where we saw resistance back in January of this year. Resistance levels often take several attempts to break through if we are to go higher. A failure at this level would be noted by a closing price below 1131 and the Volatility Index $VIX above 24. Click on chart to enlarge.

For the year gold is up 17.40% followed by the EEM up 6.37% and the small cap index up 6.12%. For the week gasoline and oil were up the most up 7.83% and 6.68% respectively, followed by the EEM up 2.97%. Click on table to enlarge.