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US Equity Markets Finally Correct, Precious Metals Correct after Wild Swings!

November 12, 2010

November 9th, 2010 Market Alert
by Mish and Keith Schneider of MarketGauge

Market Indexes

SPY, QQQQ, DIA and IWM All had bearish engulfing patterns and also distribution days. As we have seen in the past, these negative candlestick patterns can be good for a few days, or they can be negated in one day. It is just one of the many technical patterns that we watch.

All the key US Market indices also held the adaptive moving average and are clearly in bullish phases. Most bull markets have periods where the correction shakes out weaker longs, thereby yielding an opportunity to buy at cheaper prices. We point out these patterns as we see them, but still mainly focus on classic support and resistance areas as well as moving averages to establish trend. In the case of IWM, SPY and QQQQ all left gaps up several days ago, and if they do not get filled, we see that as another significant sign of strength. Plus, these shakeouts also ameliorate short term overbought conditions.

Market Internals

VIX Sentiment This indicator is firmly in bullish territory while skimming the lows, so even with today’s sell-off, the fear factor is quite low, but not excessive.

Accumulation/Distribution Volume was heavier today than yesterday, and since all key indexes closed down, we registered a distribution day across the board. However, volume patterns are still bullish.

McClellan Oscillator This Advance/Decline indicator is now back in neutral territory, with lots of room to move either way.

Sectors and ETFs

GLD (gold) and SLV (silver): Gold and Silver hit new all-time Highs today and then corrected. Silver moved almost $4 dollar an ounce (15%) in the span of a few days. We can remember just recently when that was its range for a decade. We believe that this volatility will continue and persist. We exited longs today using a chandelier exit, and are now looking for some short term consolidation to re-enter.

Most commodities and commodity related ETF’s are on a tear and are in the process of making historic moves.

FXE (Euro-Dollar) went right to 1.37. As we mentioned in our prior issue, the breakout failure above 1.41 of the Euro was the tell. We still look at 1.40 as a pivotal area, and short term see the Euro under pressure.

Opening Range Strategies

We are looking for short term corrections in the most bullish sectors and individual stocks, and we are waiting for the 30-minute OR breakouts, as early strength seems to fade by mid-morning.

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