Indices 10/06, page-8

Dow Jones -0.09%. SP500 +0.85%. Nasdaq +1.53%. Small Caps +1.65%. Banks +1.39%

After benign inflation figures before the market opened, major indices opened with a gap higher, indices then wallowed or, in the case of the Dow, sold off during the day. The Fed's announcement on interest rates had little effect.

Looking at the Nas and SPX, I think we have to entertain the possibility that last night we saw an "exhaustion gap" created at the top of the trend. Watch for a down day on Thursday. (Smokestack on Smalls is even more ominous.)

SP500.

SP500 had a big gap-up opening, rose swiftly to be above the 3 Standard Deviation Band on the BBs then fell intra-day as sellers stepped into the market.

Volume was high - the highest in the past eight days and the third highest in the past fifty days. That fits the criteria for an exhaustion gap. Caution.

Watch for a down day on Thursday.

Commodities.

Commodities Index +0.33%. Energy +0.62%. Base Metals +1.18%. Agriculture +1.98%. Gold +0.28%.

Those figures for Commodities look good, but the graphs give out a warning. The last candles (four of five) are black bodies - which means the items finished below where they started. So, after an initial gap-ups and further buying, the items then sold off to finish below where they opened. That's a bearish signal. Caution.

Overnight Sydney Futures are up >0.6% this morning, so a positive day is highly likely. Watch for selling later in the day - if the U.S. experience is any guide.

Good luck.