The S&P 500′s uptrend remains intact in a defined channel that found support today, during the stock market sell-off, at the 20 day moving average. The chart below shows the trend channel as well as the moving averages.
There are some technical issues at play here, however, that we cannot discount. First and foremost, as I mentioned in the previous post there is a double top pattern in the S&P 500 that is playing out and causing a decent amount of fear. Combine that with Chinese inflation worries that toppled the Shanghai index down over 5% last night and we find the markets climbing a wall of worries in to the weekend. Most commodities took extreme hits today, with sugar, silver, palladium, gold, cotton and various grains falling off their highs. Oddly enough the dollar was weak while all this selling in commodities and equities was taking place, which is contrary to what we’ve seen in the past months.
Seasonally this time of year tends to be rather positive for equities. The holiday season usually gives earnings and employment a boost and consumer sentiment usually picks up — except for what we witnessed in 2008 of course. Next week should shed more light on the technicals and fundamentals of these markets. As we see trading begin in Asia it will be interesting to see if the appetite for precious metals is once again renewed as it was after the silver sell off on Tuesday after the CFTC raised margin requirements by 20% (from 5% to 6%).