Excerpted from the February 12 edition of Notes From the Rabbit Hole, which included extensive analysis of gold, silver and the gold stock sector, along with commodities, yield spreads, currencies and market sentiment.
Can SPX eventually surmount resistance at 1360 (pending a routine correction to 1260?) and make it to 1500 by the end of 'i12' [short for our new tag line 'inflationary 2012']. What about a measured 1600? Let's manage current resistance and the probability of oncoming correction first, before we think about crazy (and by the way, quite doable) upside targets. But there they are.
Might the Nasdaq 100 also have designs on higher levels? A pullback and successful test of the green shaded support zone at around 2400 could provide the fuel for an eventual lift to the 2800+ area if 'i12' remains on track. Again, think about the roles silver and especially the Silver-Gold ratio [SGR] play in all of this. If SGR has completed its downside as an economic destruction indicator, it would give the all clear for many asset markets to continue to rally for an intermediate cycle. If the SGR has not bottomed well, not so much.
The NYL World Leaders index is at an important juncture. It has just crossed above a resistance line, which it will now try to turn to support at 5500. MACD has not yet gone zero+, but is close. A break of the red dotted line would be bullish and a failure and turn back down below fledgling support would be, again... not so much.
The China 25 ETF shown below is a perfect illustration as to the predicament that many global markets are in. As noted in previous NFTRH, the bottoming pattern measures to a target of 49, which just happens to coincide with the upper trend line (got to love the confluence), BUT... FXI is dealing with a lower trend line that coincides with a thin range whereby the ETF deals with resistance just above and support just below (got to love the confluence).
This battle will define the near to intermediate future of FXI, as will many other battles going on out there in US and global markets. This is a bottoming pattern and 49 is the upside target. FXI has hit the expected resistance zone, along with various emerging and developed markets. If the resistance proves to be routine, perhaps we can load the upside target. But if any corrections prove to be significant, it will not take much to break this bottoming scenario. Stay tuned.