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 ...before Friday's quarterly OPEX session provided a much needed pause to refresh.

Our pause to refresh continued this past week with the large caps losing 1%, the small caps and secondaries gaining a small amount, while the mid caps closed flat overall.

The big news of the week came with the Precious Metals and XAU advance/decline lines where both moved below their summer lows on Tuesday. This continuing weakness suggests that unless there's a hard about face in the flow of money towards this asset class next week, we're most likely going to see a challenge and subsequent break of the late June price lows in both gold and silver by the end of the year. This underlying impotence is also an indication that money believes that it's not looking for any further monetary easing in the unforeseen future, and by reverberation, that we should continue to see a steepening yield curve in 2014.

Speaking of yields, the 10 year note continued its journey towards its downside target of 2.55% by losing 113 basis points or 4% for the week to settle at 2.62%. Meanwhile, the NYSE Bond CEF advance/decline line continued to make higher highs which would further suggest that we'll likely meet our downside target in yields sooner than later. On a more intermediate term basis, any break in yields below the 2.48% level would then open the door for a full snapback to around the 2.15% level before we're then likely to see a more potent advance in yields per the indication we're getting in the gold market.

Other than that, it was pretty much a ho hum week as the markets turned their primary attention to the day to day movements of the budget battle going on in Washington. Although most of the pullbacks we see in many of the A/D lines were shallow, we do note that the FTSE advance/decline line pushed below its short term support line and is now leading prices to the downside. Given how many of the breadth McClellan Summation Index' are also curling lower right now, one would think that the bulls may be running out of time in attempting to keep the current rally in check. However, we also note that the NYSE Open 10 TRIN is at its deepest "oversold" level in over three years, and that option put buying is at a fever pitch according to the latest ISEE data. This would then support at least a multi day technical pop to the upside just to relieve these same highly negative imbalances. Even the BETS indicator improved this week to a +45 on Friday which not only moves this indicator to a more friendly "bullish bias", but this improvement also came with an overall pause in the markets in general, and more importantly, continues leading prices to the upside.

So, for now, let's continue to give the bulls the benefit of any doubt out there for next week as it will be up to the bears to show some better conviction in their bias if they expect to get anywhere fast.

Have a great week of trading!

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