The Brains Trust, page-11263

Interest rates in the US were the focus again at the close of last week with yields suddenly all retreating. But what was interesting was the effect this had on the markets. Wall Street was mixed, the US dollar rallied only a smidgen, the New Zealand dollar was quite a bit better (remember we watch this for early signals), metals did very little but there was one commodity that I noticed was very strong – wheat. This is a market I watch very closely because a shortage of wheat can be the very fist sign of inflation coming down the road. The one thing we all have to do is eat.

On the back of a weaker pound, the FTSE has now gone up for eight consecutive weeks and is up to its previous all time high from the beginning of the year. Double top anyone?

Coming back to Wall Street, the S&P might still be forming a little bullish flag but if it is going to morph into this pattern, it really does need to get a move on. But off-setting that, the Russell 2000 which has been leading, looked a bit toppy.

A few weeks ago I drew attention to the fact that the Indonesian Index had broken its uptrend. At the time I mentioned that I had not seen any news events to cause such a break. However, over the past week we have certainly seen the evidence of what was already obviously worrying the market. Markets are always looking forward – not back.

Gold did very little in Friday’s session. One thing to keep in mind is that in the recent sell-off of gold it pulled back almost perfectly to a 61.8% retracement of the whole move from the December low to the January high. At the same time the Commercials net shorts is now marginally below the low set in December. I have certainly got the correction I was looking for in our gold section after these stocks got very overbought with our gold index XGD, having retraced just over 50% of the whole move up from the February low. Now I would like to see a consolidation following such a sharp correction.

XJO has continued in a fairly tight band. Looking at the hourly, I now have a really nice rounded top pattern. Need to pull out of this fairly quickly – I mean rally – otherwise we will be seeing a sizeable correction.