Outside Up Day

Tuesday’s market had to make a decision on the direction it wanted to take.  Early on it was up as the overnight futures were strong.  That early rally fizzled as we dropped hard for a little while during which the Dow was down about 30 points.  This fade was followed by a move back to unchanged where it traded for the next couple of hours.  Then the Fed’s minutes were released indicating that the Fed was almost done increasing rates.  Well, the next hour was pretty much straight up as the Dow gained about 140 points.  Other market indexes fared similarly and brought smiles to many bulls.  

As we mentioned in yesterday’s post, we expected “a traditional rally for the first few days of the year.”  We didn’t think the market would try to make the entire Fibonacci retracement in one day but it may have.  We actually thought about the 10,850 level as the perfect retracement level when we posted yesterday but today may mean the bulls want to move up a little bit more.  That is fine with us as we could take advantage of higher prices to sell into.  That has been the plan anyway.  We will see how the market trades in the next day or two.

Today’s volume was fairly strong the indexes all enjoyed an outside Up day.  These types of days should be viewed with a little caution as it was news related and did not come out of thin air.  When rallies or declines come just because and without any news, those are the ones to really watch.  It has been widely anticipated by the bulls that the Fed would have to stop raising rates sometime soon.  Today’s news that the rate increase program is almost over gave the market a relief rally.  

Don’t forget to watch for a move up to the ceiling the market set for itself over the past couple of months.  These levels are the key ones to watch.  A big rally like today was preceded by weakness last week so be careful.  

You may be aware that the type of environment we are in would be good for the precious metals and their stocks.  That was true in a big way today as gold was up about $12 and the HUI was up over 20.  It’s difficult to watch these prices go up without us but we still don’t think the rally has legs even though today was pretty impressive.

That brings us back to the stock market.  The stock market rallied in spite of the big increase in oil prices.  So, the market is shrugging off fundamental negatives coming from the commodities markets.  Again we say, Be careful and be selling rallies.

Dow Industrials:   10,847.41   +129.91
RYVNX:     18.60  
TLT:    91.78
BEGBX:  13.22  (dollar took a hit today)