Major averages continued to bounce but on weaker volume once again, while remaining below their respective 50-day moving averages where they could encounter resistance and head back to retest lows. Alternatively, the averages could baby step higher under the influence of QE3, only briefly pausing at 50-day resistance. Price/volume action of major averages and leading stocks will be our guide.
As for precious metals, both gold and silver plumbed new lows in Wednesday's trade. Many cross currents abound, so while they are both deeply ensconced in downtrends, it is best to not try to guess where they will go from here. While both sold off again yesterday, this could be partly due to the perception that QE will end sooner than later. On the other hand, economies are still struggling around the world including in the US which would imply continued QE3 which would bode well for the general markets if QE1 and QE2 are any guide. Further, the Chinese, who are experiencing a liquidity crisis as the Chinese Central Bank is leaving the banking system on its own to shore up its balance sheet, may be liquidating gold reserves for the purpose of increasing liquidity. For now, major support for gold lies somewhere between $1,000 and $1150, but we remain uninterested in the yellow metal.
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