As expected, markets rallied to new highs today then quickly reversed in the later stages of the day. This formed a candle stick pattern called A Bearish Gravestone DOJI.
This is a reversal pattern and something that I would expect to see around this price. Confirmation tomorrow with a negative day is required however, I took a speculative oil short again. I prefer not to trade oil however, I haven't found an etf with the same liquidity for the overall markets in Canada. However, I might start looking into some listed on of the NYSE such as SDS.
Another note is that the slow stoch has again fallen out of the 80 level. This is continuing to signal that this uptrend requires a pull back to correct the overbought condition.
This action has done exactly as I expected and this week I do expect to see a substantial reversal, however, from that reversal will be an up leg that will fail to make a new high resulting in a bear market for the next month or so. The only caveat to this is what will happen Nov 2nd with both the midterm elections and the FOMC meeting. I do expect QE2 to be announced however with much reserved language and not the @1.5 - 2.5 trillion that I think many are expecting. The market has priced so much QE2 in that the boost has already been realized and hence no need to actually follow through with the amount expected. I believe the markets will be allowed to correct however they will be pumped up again with more QE2.1 talk.
Remember that the US are not in a bubble and international pressures will continually mount against them. In addition to this, once the people in the States realize that prices have started to go up substantially due to the devalued dollar they will start to mount pressure as well.
This will be an interesting conclusion to the year and everyone with a computer has front row tickets.
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