How is this going to resolve? There are several indications to look out for this week. By all means let’s see if China can hold these approximate levels without having to retest its bottom. Then watch Copper to see how it breaks or whether it is content to stay in its range. You also want to watch the XAU which is testing long term support near the 170 level. The mining stocks represented by the XAU are at critical support. A break here gives us the biggest correction since the 2008 commodity crash. Precious metals are in a long bull market, we can all agree on that. However, during this gilded age for Gold it has come to edge of the ditch many times and turned back up. This is one of those times. Finally, our chart of the day is the Apple computer which has come off the high but has very good calculations to this point and may be in a position to bounce in the 590-96 level. If it does that it should take tech with it and the correction will be moderated. It doesn’t mean we’ll go back up.
The outlook for the second quarter is not so clear. What usually happens is when major indices break through key resistance levels there is generally a period of digestion and consolidation. With the VIX where it is, it does not appear to have a lot of room to move higher from here. We’ll need more days where the VIX rises or periods where we get serious shakes of the tree to work off some of the happiness. Most important we’ll need the SSE to hold its bottom and we’ll need to see these indices establish where they want firm support to be in order for a fresh leg to materialize. We could see periods of backing and filling.
Click chart to enlarge