Hurricane Sandy overshadowed everything this week as it wreaked its destruction and the power of nature exerted itself over our relatively insignificant worldly concerns, such as the financial markets. Last week we were expecting a turn of 20-week magnitude, which just might have formed this week, although it was a short trading week in the US because of the storm, and natural disasters are always accompanied by volatile market action which should not be taken too seriously. And so I won’t over-analyze this week!
The S&P 500 might have formed its 20-week cycle trough, but it is too soon to tell. Last week we looked at the 20-week FLD, and it is interesting to see how price has continued to track along that FLD, which is usually a bearish sign, and so I wouldn’t be surprised to see price fall lower into the 20-week trough.
The Nasdaq was similarly volatile this week, leaving a potential trough in place, but here too lower prices are still likely before the trough forms. The data from Kinetick only goes up to Thursday in this chart. Friday’s price action was similar to that of the S&P 500: downwards.
The Euro continued its decline this week, heading down towards the 40-day cycle trough. The M-shape of the current 20-week cycle is beginning to take on a distinctly bearish look.
Gold fell hard on Friday. Two weeks ago I mentioned that the 20-day FLD would probably provide resistance to any upward move, and indeed it did.
30 Year US Bonds
Last week we looked at the 20-week FLD in Bonds, and I suggested that it would provide resistance initially, which is exactly what happened this week. Price is expected to break to the upside of the FLD eventually, but it looks as if bonds are going to wait for their second opportunity before doing so.
Crude Oil continued to work downwards this week towards the 20-week cycle trough. We probably have another week or two to wait before the trough forms and prices bounce back up out of the trough.
US Dollar Index
I presented two analyses last week in the US Dollar, both of which were bullish. This week’s strong move up was in line with our expectation, and we’ll keep watching to see just how much bull there is in the dollar, before deciding which of the analyses is the true one.
We have many readers and Sentient Trader users in the New York area, and our thoughts are with all of them.