Stocks fell 2% after racing to new highs. Despite new highs, Breadth continued to deteriorate as nearly 7 times new 52 week lows were recorded vs new highs, indicating broad weakness in small caps. The New Economy sector fell to a 5 month low when compared to the Old Economy. While Downside volume was prevalent 3 out of 5 days, the “heavy dose” we were looking for never showed up, indicating the topping process will likely take longer. A SPY correction to 273.36 (7%), is strong Weekly Fib support, and should be followed by a failed rally. Nearer Fib support 278.35.
After 8 weeks of heavy cartel paper selling, (with the low of 1167 set 8 weeks ago), spot gold closed Friday above the important 1200 level. (1203.50). The metal must now clear 1220 for a move to 1245 and 1310. The XAU continued to inch higher (65.49) with the first positive momentum week after 15 negatives (5 week rate of change).
The shares have re-established leadership showing a 6 week high when compared to bullion. The key level for the XAU that needs clearing is 84, for the bull market to be established in earnest.
Sharply higher interest rates, propelled the Dollar (UUP) to approach Fib resistance 25.53. (Actual high 25.48). Strong Fib resistance 26.04. Fib support 24.60 – 24.32 (strong).