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fib_1618

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With our being on the doorstep in what promises to be a razor thin outcome in next Tuesday's national elections, we'll watch to see how these three markets fare in case no winner for President is immediately known, as to what we can generally expect for the rest of November.

Last Tuesday's election surprise of a bigger than anticipated win for the incumbent drove the markets sharply lower on Wednesday, while building bull divergence across many indices with the McClellan Oscillator. But the market then broke down even further on Thursday and took away these same divergences, and what was initially a simple corrective sequence, has now turned into something much more that needs to be respected for what it may suggest for the rest of the calendar year.

Among the negatives this week is that we have the NYSE Composite and Common Only advance/decline lines completing their snapbacks to what were their previous rising bottoms lines, and then both moving to new reaction lows by the end of the week. This same lack of strength then allowed many of the major prices averages to either test or break their their respected rising bottoms lines that had their beginnings at the early June price lows. This would now suggest that more time is going to be needed to correct the excesses that came with the early summer to early fall advancing price structures, with the likelihood of a challenge of the June price lows themselves now a greater possibility than thought otherwise last week.

Overseas, we see that the Aussie, DAX, and FTSE advance/decline lines also showed a break in their trends further indicating that the US market's internal fracture of last week will likely have far reaching effects on other global marketplaces as well.

As was our expectation from our last review, the yield on the 10 year note did break below its rising bottoms line mid week. With the NYSE Bond CEF advance/decline line closing the week again at new all time highs, the expectation from here is for an eventual challenge of the yields seen in the August 2012 period.

Both the NYSE Specialty and REIT advance/decline lines had a poor week, especially the real estate data that broke below its rising bottoms line from November of last year. After any near term technical snapback to this same line of what was positive influence, the expectation from here is for further weakness to be seen in this sector, with an eye of finding ultimate support with the early summer 2012 lows both in breadth and price.

Finally, both the Precious Metals and XAU advance/decline lines held up relatively well with the markets recent breakdown, with the price of gold itself bouncing off the horizontal line seen on the chart. With bull divergence still holding on the XAU data, any further strength from here would be an intermediate term positive for the equity markets in general, and with higher highs being seen in the NYSE Bond CEF breadth data, would then compliment the idea that any further correction in the markets is not so much because of a lack of liquidity, but it would be more in keeping with both a market re-evaluation because of the election outcome, as well as, any end of year profit taking in advance of both capital gains and income taxes in the United States going up by 10% or more starting in 2013.

Have a great week of trading!


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