Morning Coffee. Saturday, 9 April, 2011

Yesterday, the Australian market rallied almost 0.7% on lowish volume.  (XJO volume lower than the previous three days.)  That may negate the significance of the rise.  The RSI rose above the hyper-danger level of 70.  Advancing volume was more than 2billion shares.  The two previous times Advancing Volume has done that were 14 April 2010 (a top followed by a correction in the market), and 14 January 2010 - not quite at the top but again followed by a correction.  Looks bad?  Maybe.  Back in July/August/September 2009 the market saw a series of these figures - so that was bullish.  The best guide is market action.  These are just warning signals.

The American market as measured by the SP500 and the Nasdaq Composite Index is in a short term down trend.  Volume on Friday in America was also low - so that may counter the validity of the move.  Medium term uptrends have broken to the down side but the 13-Day Moving Average still holds.  The Dow Industrials last night was not as bearish as the other two big indices - more of a spinning top candle than the bearish candles shown on the SP500 and Nasdaq.  It is important, however, that this retracement has started at a significant oblique resistance line.

If oil drops in price and the Americans can resolve the budget impasse, this retracement could be short lived.  Plenty of support lies near at hand.

Good luck
Red