Trading junction approaches fast now: market comments 11/4

It's an exciting time in the markets as there are key levels being strongly tested in many, including the euro, dollar, oil, other commodities including natural gas, even bonds. Naturally, since we just had the U.S. elections plus the Federal Reserve announce "QE2" quantitative easing in the form of $600 billion in purchases of U.S. Treasury bonds. This printing of dollars is to put new money into the financial markets, induce investors to put their money into non-bond investments (commodities, stocks), and ease the country's ability to finance big spending programs that supposedly stimulate the economy. About that theory ... well, whatever (yawn)!! We won't re-hash the theories and arguments - let's look at and trade the results. The euro, converse to the dollar, looks thrusting up from a triangle that formed over the last couple of weeks. In most instances, this thrust should be a fifth wave that concludes a bigger move and therefore fails over to a pullback correction. So be alert for that, starting maybe today, tomorrow or Monday (my best guesses). The typical pullback level would re-test the triangle often at its midpoint. After that comes the bigger test...!

We believe the markets will probably have a good correction - currencies, stocks, maybe even commodities - which could go somewhat deeper than implied by the euro merely retesting the triangle midpoint. Look fir moving averages, Keltner channels and Bollinger Band levels to be tested. But then we also believe this will prove merely another great buying opportunity as the markets recover again and move higher into next year. It remains possible for an alternate scenario to develop, a deeper pullback that lasts much longer. But swing traders who look for pattern buy setups from support after a correction should be able to take the buying opportunity with reasonable stop loss protection for peace of mind. We'll track all that as it comes.

Meantime, we'll be looking for stock markets like the $SPX around perhaps 1215 and watch for a likely crest to show up soon, for at least a temporary top to the current uptrends.