The Rally Continues

The markets continue to move up. On Bloomberg, economist Nouriel Roubini is looking for the recession to end this year.

We're not so convinced here that the recession in the real economy--you know, the one that you actually live and work in--will be over, but we do consider the possibility of a cyclical bull market entering this long term secular bear market (don't worry, in the next segment of "Where?" we're going to get into that in more detail). If so, we could see several quarters of positive news, but we suspect little in the way of improvement in unemployment. Nonetheless, the market continues to move up on hope and green shoots. We'll have to see...

The S&P continued to force its way up. Yesterday we noted an expectation that it may close flat to moderately lower. But thanks to Dr. Roubini, we were off to the races again.



Note that we're entering overbought territory on the stochastics. Since we're right up at the former top of the head (of what was formerly the possible head and shoulders top, that got it's head handed to it on Monday), there's going to be chatter of a double top. The S&P needs to close above 946 and rally to break through 956 to shut that chatter up. Those levels are noted on the above chart by the horizontal lines.

The dollar continues to confirm all of the inflationary moves by weakening.


The dollar has continued to break down below the symmetrical triangle as predicted. The downtrend continues.

Note that the MACD is turning negative, but the stochastic is headed toward oversold territory. Support is at the 78.40 level. That level is very, very important to the dollar.

Since the S&P and the dollar are moving inversely and are close to resistance/support, those overbought/oversold regions are going to be important very soon.

Let's assume the S&P can continue to rally through the resistance band. This is what we're watching a little further out if that happens:


That's a broadening top or megaphone pattern. Above 956, that 975-ish level may be the end of the rally.

The S&P has a lot of resistance ahead of it. Note that the TED spread is starting to rise and corporate bonds are a bit weaker. Nonetheless, we're not in panic territory (though there's a chance we'll be there in a few weeks' time).

Meanwhile, our good friend gold ended the session above the 50 day moving average and broke the downtrend line with everything turning positive. We always like to see that happen to good, honest money.


Stay sharp out there and don't get too irrationally exuberant.