Market Crossroads

February 3, 2010 · Posted in Weekly Posts

The market is at a crossroads today as the decline last week seemed to stop in mid-drop without really seeming to “complete”. Certainly the basic material and energy sectors became very oversold and so were due for a rally but still, we wonder if we can be truly done without probing lower. We offer only two charts today. The first shows the S&P in a rather complicated spider web of trend lines. The takeaway is that there are multiple intersecting resistance lines immediately above the current price. If we break through those then a further rally, possibly to new highs is in the offing. If we fail we can at least expect to retest the lower, down-sloping trend line. The rest of the week is critical and we have the employment report Friday…

The second chart is gold which remains in a descending triangle. If it breaks downward then look for markets to sell off. Gold and the S&P have correlated well recently, S&P down has usually meant gold was down as well.