Stocks, Gold, Baltic Dry Index all higher

Stock indexes were higher today. It was a small rally, but there was evidence that a rally would come in today, as mentioned in the comment of Friday. You can see the green buy dot on the chart of the QQQQ post last Friday, and today the market rallied right up to the declining moving average line. The main trend is still down, and this seems to be the start of a counter-trend rally. I have no idea if there will be follow-through or if this little bounce will abort with the downtrend resuming. The market is trying to swim upstream here, and may run out of momentum at any time and without notice. It is safer to trade in the direction of the trend. There is much overhead resistance as indicated on the chart from Friday, and it is sitting on the first line of resistance now. If that can be overcome it may challenge the pivots overhead, as drawn on the chart on Friday. If those pivots are overcome, then there could be a more serious upside move. But any failure could send this market on the next leg down, which would be the path of least resistance with the trend being down. I wish I could be more definitive, but there are two sides here, and two cases to be made.

There isn’t much new to add to that chart today so instead I’ll post the Baltic Dry Index, which I haven’t posted for a while. You can see on the chart to the right of the BDI that the parabolic stop (red dots) was finally hit after containing prices during the dramatic downtrend recently. It looks like the back was broken of this bull run and bubble. A rally to retrace a portion of the downmove would be normal. While a rally to new highs is always possible, it appear unlikely in my opinion. But anything is possible. I’ll try to keep an open mind as I judge the character of the retracement. If this index has a modest bounce and then a resumption of the downtrend, the obvious implication would be more downside to the Chinese market. Speaking of bubbles, the Wheat market had quite a reversal down day today. It was obvious some air was ready to be let out of this market when CNBC was giving Wheat prices every few minutes and presenting the bullish case for higher prices. Markets tend to experience reversion to the mean whenever they get the most attention and there are no fundamentals to be seen to support the opposite side of the trade.

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