Markets got drubbed last week. But that’s not the story as much as the NQ tested its low on 2 occasions, reversed and could not sustain the move off the low. It looked for all practical purposes that Friday could be the day but a late day swoon ended that notion. Someone said it was irrational short covering and from where we sit now that’s what it looks like. From where I sit, what needs to rally hasn’t, and what could break down, might. Perhaps the most intriguing chart of the week is the long term US Dollar below which held the intermediate term Andrews pitchfork without breaking down. If we are to leverage that chart chances are good the risk on will be taking another break next week just at the point it could be finding a low and the stock market could break free from current support levels. For the markets to come back, we needed to see Andrews get violated here and instead turned back up.
In the commodity charts, the grains complex shows the greatest potential to break down as we’ve discussed a head and shoulders type peak in Corn over the past year. But it still has a triple bottom layer of support just below so we are not there yet. But Corn is very close to breaking free. The action is pitiful. It’s not setting up good because it should’ve bounced by now. Corn is similar to the XAU which had multiple lows over the past few months and if it was going higher, would have done so by now. I discussed this very same condition for the XAU several weeks back and we see what happened. It broke down.
In the category of what should’ve rallied by now we have the NQ representing the equity market. Early in the day we had that crazy short covering bounce and it looked to the entire world that after several shots at the low it was finally going to break through. Late Friday after a pullback of about an hour off the high of the day an intraday double low tried to bounce but absolutely failed.
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