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No matter what market you look at they are all weak right now – our local market, global equity markets, commodities. They all have one striking characteristic – an oscillator that has gone well below zero. This is most evident in gold:
click to enlarge
Gold has been struggling since mid December. When the oscillator goes well below zero it is a strong indication that it will struggle to recover. Gold and other markets will recover but it will be a hard road for a while.
We could well see markets go into an extended range trading mode. This is best illustrated in the below chart:
click to enlarge
Technically the most vulnerable of markets is our own. The pattern I talked of last week came to pass but the downside is not yet over. What we saw last week was a mini version of Elliott’s five wave impulse pattern. What we are now seeing is a more expansive one:
click to enlarge
That is we may well see a recovery but there is still a risk to the downside and the 4400 I talked of is still a real possibility. If perceived risk increases then investors will sell into rallies and that will push the markets lower.
World markets are now sensitive to a whole new raft of issues to last week. It is not so much the issues but rather the fact that any issue could freak markets right now.
They are just plain weak and sensitive.
Enjoy the ride
Tom Scollon
Chief Analyst
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