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The Great Uncertainty

Adam Hewison - MarketClub

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Hello MarketClub members everywhere! How do you feel about the economy, the world, the elections, ISIS or ISIL...? Take your pick.

The other day at a general staff meeting I posed that same question to our amazing team here at MarketClub. I have to say that it was no surprise that they felt there was great uncertainty in the air. It wasn't just one thing, it was a combination of things that made them feel a little uneasy.

So the question is, how do you feel about the markets?

To me, something just doesn't seem quite right. It's not just one thing, it seems to be a combination. The reality is, the markets cannot keep going higher based on cheap money because sooner or later it's going to implode unless the Fed wakes up and gets real. On the fringes you have Puerto Rico running out of money and who's going to bail them out? Across the ocean, Greece is once again close to imploding. Who's going to bail them out? The IMF?

Are stocks at a tipping point? 

I feel a little uneasy this morning with the markets close to major resistance levels and also very close to the PSAR on the downside. Here are the levels I'm looking at in each of the major indices. If these PSAR levels are broken, it would indicate further weakness.

DOW (INDEX:DJI): 17,498.02
S&P 500 (CME:SP500): 2,035.14
NASDAQ (NASDAQ:COMP): 4,838.62

Watch these levels carefully today, particularly towards the end of the day.

Gold (FOREX:XAUUSDO): The gold market has been particularly interesting considering the choppy action of yesterday. This type of action caused a positive signal on the PSAR. Since the beginning of the year, there have only been two signals on the upside with this indicator. The first signal produced a rally of $169 while the second signal produced a rally of $27. Another indicator to watch carefully today is the RSI, which is just below the 50 line. A close over that line would indicate an upward trend. It is also worth noting that the second quarter for gold has an 80% success rate when following the Trade Triangles. At the moment, only the long-term monthly and daily Trade Triangles are positive. Conservative traders should wait for the weekly Trade Triangle to turn green before getting aggressive on the long side of gold.

Crude Oil (NYMEX:CL.M16.E): The price of crude oil reached my downside target around $35.50 a barrel yesterday and came within a few points of its 61.8% Fibonacci retracement target zone. As I expected, support came in around those levels. Aggressive traders who took my advice should exit this counter trend trade today and take a nice short term profit out of this market. At the moment, the trend remains negative and I expect to see more of a trading range around current levels as this market decides what it wants to do next. Crude oil would have to move over the $39.44 level before the PSAR turns positive. I still view the major trend as negative and we may have further to go on the downside.

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