The Brains Trust, page-13585

Market gods were smiling on us again with a very bullish move in New York and the added benefit of strong commodities. The RUT couldn’t hold its earlier peak while the NYA (all stocks listed on the NYSE) finally did something with the nice pattern I have mentioned a few times but the real highlight of the night was the SPX. But why was the VIX higher – why is there always something thrown in from the left field to make things difficult? With such a strong session the VIX should have been weaker. Just one thing we will have to keep in mind.

I mentioned yesterday that as this advance on Wall Street continues one of the important things we will have to watch is that we don’t have a growing list of divergences – there is already one in which I am particularly interested and that is measuring the SPX against some of our commodities. Despite the sharp rise in the SPX, it has not gone to a new high against gold (GLD), silver (SHNY), copper (COPX) or even the whole commodity scene when measured against an equal weighted basket such as GSC. I find this particularly interesting because there has been a lot of comment on how weak commodities have been but something could be slowly changing. So at the end of all this, what I am trying to suggest is that this could be one of the very telling points for the SPX as we attempt to weigh up its chances of continuing the bull market. However, it must be remembered that divergences usually take a time to build up, a bit like watching the Commercials in gold, but if money does start to run back into commodities it is obviously going to make a huge difference.

Asia was very strong yesterday – Shanghai broke its short term downtrend, Japan broke topside out of a triangle pattern and the champagne was still flowing with the Sensex as they scored another new high.

Australia struggled but the gold and mining stocks carried the day. Hopefully we might do a bit better today but with politics casting such a heavy shadow over everything at the moment, enthusiasm seems to be somewhat darkened.