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Increasing Signs of Stalling out Following Sharp 10% Rally


Ahead of this week's ECB meeting, Stocks have pressed up to near key areas of resistance after nearly a 11% rally in the last 17 trading days.  Signs of US Dollar weakness vs many of the Domestic and Emerging market currencies has caused a huge rally in many commodities, which began with Energy, and was followed by the Precious and Base Metals.  Iron Ore managed to make one of its largest moves on record, while Copper, and Lumber both have showed sufficient strength to begin trending back higher after lengthy declines.  Overall, the positives of Positive Breadth on this recent rally attempt (With a healthy ratio of Advancing to Declining issues) and Above-average Volume flowing into Up vs Down stocks, along with ongoing negative sentiment, and improvements in Sector participation during a positive seasonal time should allow for further gains in the next 2-3 months in stocks.  However, in the near-term it's tough to completely rule out that this bounce is simply part of an existing bear market, and is due to stall out and turn back lower.  For now, the issue of Overbought conditions (with stocks having moved a bit too far too quickly in the last three weeks) along with stocks having reached areas of importance near former LOWS from November/December 2015, areas which are likely BARRIERS in the near-term to further upside gains (FORMER LOWS now serving as OVERHEAD resistance on rally attempts) likely should cause at least a bit of "Backing and Filling" before this rally can continue.  Importantly, Watching WTI Crude oil still is very worthwhile given the strongly positive correlation, along with 10-YEAR treasury yields andthe relationship between US Dollar and YEN, all of which have enjoyed a moderately positive correlation of greater than 0.60 in the last few months.   For Monday's trading,  Movement above earlier highs at 2008 in S&P March futures would have importance into the close for further gains, while pulling back UNDER 1984 can allow for a move down to 1973-4 which is an initial area to buy.