What a week to be away from my office – New York has gone up every single session. I put forth the idea in my last notes that the PPT (Plunge Protection Team) might have been called to arms. The way the market bounced of such important round numbers like 2800 on the S&P and 25,000 on the Dow does raise a little bit of suspicion. As one of our posters
@Diver Dan so succinctly put it, with their mid-term elections coming up in November, it is not just a matter of surviving, they must be seen as thriving. However, as a Simple Little Chartist all I should be concerned about is that Wall Street had come back perfectly to support and if the pattern was to remain bullish, the market needed to rally from those levels.
Overnight on Wall Street we have seen the S&P touch a new all time high but couldn’t hold that level into the close. Of the nine sectors, only Consumer Discretionary (everyone is spending their tax cuts) and Health Care were at new all time highs. I have mentioned previously that the Russell 2000 had formed a nice little pattern and it managed to close at a new all time high. However, short term, I think Wall Street is probably due for a correction.
Unfortunately a different picture for Australia where regrettably the egos of politicians have cut short the advance here in a rather dramatic fashion. I have suggested previously that it appeared to me that politics could have been the cause of our failure to move ahead as the index suggested. This matter has obviously been festering for some time. Certainly put paid to the topside breakout in the XJO and leaves us now in a weakened position when overseas markets correct again.
However, on a more encouraging note, a downturn in the US Dollar has allowed commodities to improve slightly. Gold has had a nice bounce. I have mentioned the Commercials in the gold market many times – their net short position fell even further over the past week. This isn’t a short term indicator but if one is looking for a base in gold, then this is a really important part of the puzzle. Natural gas has moved higher again.
But I do have a couple of little alarm bells going off this morning and something we are going to have to pay very close attention to. I have been confident for some time that the price of iron ore has been handled very professionally. They may need to be even more “professional” after last night’s performance when there was selling right out into the distant months. Thermal coal has had huge rise in recent months and also did a bit of a wobble last night. Coking still holdling in OK at this stage. Let's hope those alarm bells don't get any louder.....
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