The reaction rally in the markets appears to be unfolding on schedule. From the broader perspective, a corrective process in equities will send the residual cash into bonds and this may help create the final bubble top in interest rate markets. This should materialize with a correction in the dollar and that pop in the Euro. While we are looking for a break of the 80 level in the Euro against the dollar, that should not be right now.
In the cash Euro, the resistance stands at the 11360 and 11500 level. This is where we need a closing above that level to signal a sustainable pause in trend. We need a weekly closing above 11540 in the Euro to signal a sustainable reaction rally. We need a monthly closing above 12575 to confirm a pause in the downtrend.
Even gold has become a bit oversold so a reaction rally is warranted there as well. In gold, we would need a weekly closing above 1240 to create any sustainable pause at this time. We can see that our Energy Models did rather nicely in highlighting the pop and the decline. Now we can see a reaction rally is likely as we churn waiting for alignment with the global economy. We need to see a month end closing above 1256 to produce a June high.
The Dow has support at the 170004 level. A weekly closing beneath this level will confirm a retest of support. A closing below that level for month-end would then point to at least a April/May low. We still see July and October as key targets in time.
The DAX shows a daily closing below 114600 will produce a retest of support. However, a weekly closing below 117800 will warn of a retest of support on a broader level. A monthly closing below 1059000 is required to warn of a sustainable correction.
In Crude Oil a daily and weekly close above 5425 will signal a reaction rally is unfolding. Monthly closing resistance begins at 5525 with major resistance at the 8900-9000 level. June and August remain key targets in time.
