The market got a shot across the bow today, as an early, and substantial, rally reversed in the afternoon and we had a very nasty sell off. The market is clearly getting to the point where nobody buit the day traders and HFTs are willing to buy, and the market is getting pretty over due for a drop. Volume was low today, so the damage was probably not severe, but the fact that commodities and energy were the leading sectors today could mean trouble coming.
103 has been the line of death for crude oil, a lvel it has not been able to get over since last spring. It did it Friday, and took off like a banshee today. This will reach the point where the market cries uncle, but we don't know where that level is. I have a target projected of about 112, and that is as good a guess as any.
Gold shot up as well today, which may be another sign that the market is running out of gas. Hedge Funds which missed the bulk of the stock rally are going to try to catch the moves in commodities, which will vastly amplify moves here. The problem is that the leverage will be incredibly high, and any missteps are going to result in margin calls, and big drops here.
The yield on the 10 year Treasury continues to go nowhere. I can't help but think this is due for a big move up. That might be good for the stock market, but it will really suck for those who are heavily in debt, such as the U. S. Government.
I don't know what the dollar did today, but with the moves in oil and gold, I would suspect it dropped. I don't know what triggered the market sell off, but judging from the UUP chart, it was not a rising dollar. Despite recent weakness, this appears to be headed higher.
Today's reversal was quite unpleasant for the bulls, but probably not that unexpected. The market has been overbought for some time, and has been rising despite lousy earnings and bad new out of Europe. It is responding only to the Fed, which seems to be determined to placate it, at any cost.
I will have the new highs update shortly.
