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fib_1618

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Well...the expectation last week of further technical gains got hit by a rogue wave created by the metals markets as margin requirements were raised to fight off the parabolic increases in prices - especially in the silver market which crashed 30% in less than 5 days! Fortunately enough, the cumulative PM A/D line warned us that some sort of reset was due for several weeks now with the divergence between breadth and the price of gold, no less, the XAU's lack of response with these same daily highs in the spot prices of the metals themselves.

Looking then at the precious metals charts this week and you would think that we were now pretty much done with the bull market in this asset class, but what's surprising is that the data shows that not only are we holding internal support, but we are now building bull divergence from where a price bottom can be created! The big question then for next week is will we hold these same divergences or not? Near term a reflex bounce is due as the tide comes rushing back in to fill the vacuum created by the pattern moving too far, too fast.

The NYSE cumulative A/D line got caught up in this same whirlpool towards the end of the week, but looking at the derivatives, we find that much of this pull back was due to the common only stocks and not with the interest rate sensitive issues. We also note that the yield of the 10 year note broke below its rising bottoms line this week with this same turbulence as money sought out safer areas of investment.

The Australian market continues to feel heavy pressure as much of its economy has its roots in commodities, but the DAX continues to show tremendous strength which would suggest that once this current indigestion period passes, the US markets should see higher highs in both breadth and price.

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