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It was another shellacking in the equity sector as the major US indexes tested major downside levels once again.  The one positive to extract from the brutal week was that major technical support levels managed to hold again.  In other words…stock prices bent but didn’t break all together.  This coming week should be particularly interesting given how close stocks are to breaking down hard.  It will be a true test of those closet bulls to try and stoke one more rally.  The real deciders will be whether Oil can hold stable and if China can stabilize as well…and we’re not going there.  The chatter by the Fed last week that alluded to a reduction in the likelihood of any near term tightenings is no surprise to the Doc and this could provide another short term stabilizer to stocks…maybe.

Bottom line…if the major US indexes can close another 3% lower, that should be enough to break them, however be careful bears…those bulls are going to defend hard, a rally is not out of the question.  Longer term however…lower for stocks.

Did the Doc mention something about Gold…that sleepy commodity that no one is allowed to be bullish on?  Well, price action may have gotten a tad over bought on the near term, but this lion has awakened and we’ll keep you posted.  What woke it up you say??  How about the possibility of negative interest rates for other major economic zones to start.  And probably a hundred more reasons as well.


Stephan Kudyba (MBA, PhD)                      THE MARKET DOCTOR


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