Tuesday October 5, 2010 - 01:05:26 GMT
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Lack of Buyers Drives Stocks Lower; May Be Start of Something Bigger
A top-heavy, overbought stock market finally succumbed to
selling pressure on Monday, plunging sharply lower. Since September 21 there
have been three closing price reversal tops on the December E-mini S&P 500
chart, indicating that investors were selling rallies.
Investors were also buying breaks, which in hind-sight was
not buying to get long, but rather buying to set-up more
shorting-opportunities. Mondayâ€™s sell-off looks as if bids were finally pulled,
allowing the market to collapse from the lack of buyers.
Mondayâ€™s break didnâ€™t do any damage to the daily main trend
which will remain up until the last swing bottom at 1117.25 is violated. If
this occurs, then look for a further decline to the major 50% price level at
1093.00. If equities are topping, then today could be an indication that a much
larger break is likely over the near-term.
The December British Pound continued to trade inside of the
September 30 outside range day at 1.5922 to 1.5668. This pattern has temporarily frozen the trade
as traders await the latest monetary policy statement from the Bank of England
on October 7. A pair of Gann angles is also forming a triangle between 1.5895
and 1.5676. This formation is also helping to confine trading activity.
If Monday was any clue, then traders should look for much of
the same action until the central bank meeting. In addition, the release of the
U.S. Non-Farm Payrolls Report on Friday may also keep traders on the sidelines.
British Pound speculators are focusing on the possibility
members of the BoE are leaning toward restarting the bankâ€™s quantitative-easing
The Dollar/Yen gained ground on Monday as traders speculated
the Bank of Japan would leave interest rates unchanged at 0.1% while perhaps
announcing further easing measures to combat the rise in the Yen.
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