Market Observations 26 September 2011

Writing this post close on 26 September. We saw a large move up in risk assets, on news that the situation in Europe is close to resolution. I disagree with that view, but the markets have seemed to react to every news leak or quotation.

SPX

Weekly View – Just to give a weekly perspective here, the engulfing from last week perhaps confirms the view that the market is broken although bulls can argue that the defense of 1120 to the downside is a sign that we are set to rally. I am biased to the downside based on the weekly view, given the break of the 2.5 year cyclical bull market back in early August. I do believe we will test the July 2010 lows, at which point will be a make or break for the market

Hourly View – Here again we can see more clearly the hold of 1120 and the subsequent rally we got today. The next level of contention seems to be the 1189-1200 region which I have highlighted. This proved to be a supply area from which stocks fell out of bed before. It would be prudent to wait to sell stocks until that point is retested again.

Gold

Weekly View – Despite the large correction in gold, it is still acting fine technically. The move to 1900+ broke out of the channel it has been respecting for nearly 3 years, and thus a correction was warranted. The low this morning at 1533 respected the lower bound of the channel and coincided with resistance turned support from earlier in the year. This is shaping up to be a great buying opportunity and I have already began to do so in small positions.

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