Monday, September 27, 2010

Weakness at Resistance

The markets were due for a pullback and we may be starting one. This could either be a pause that lets the markets work off overbought technicals or it could be yet another top in this brutal trading range.

The choppy trading range has ground down the confidence of many investors and driven volume down so low that several banks are now making layoffs to offset significant declines in revenue.

There is pretty significant divergence between a handful of leading names and virtually everything else. This is how major tops form. The laggards had better start seeing some buying or…

Here are some key economically-sensitive areas. You can see how they are still stuck in trading ranges –

Metals (XME), Transportation (IYT), Financials (XLF), Homebuilders (XHB). The markets will be much better off if these areas can join the party. A breakout after a shallow multi-day pullback would get me interested.

I will begin to post support levels as the week progresses.

There is leadership. You can see how Latin America (ILF) is trying to break out of a 1-year trading range and South Africa (EZA) has already broken out.

Both of these are heavily focused on resources and benefit greatly from a falling US Dollar. This afternoon, Brazil’s Finance Minister, Guido Mantega, became the first international leader to admit what we all know already –

“We’re in the midst of an international currency war, a general weakening of currency.”

Brazil, South Korea, Japan, Taiwan and several other countries have been buying US Dollars to try and make their own currencies more competitive for international trade. When the US Dollar finally implodes, these countries will have some major social dislocation to deal with, as it becomes competitive for Americans to actually build and manufacture the stuff it consumes…

Hourly Reversal Patterns?

Potential reversal patterns on the hourly charts with the daily charts at time and price resistance.