Unrest in Egypt could turn out to be the catalyst for triggering a long overdue global stock market correction. I saw some negative factors beginning over the past couple of weeks, most notably the ValuEngine Valuation Warning and the negative divergences away from the Dow Industrial Average, as all major averages are still overbought on their weekly charts.
In discussing the US Capital Markets, we know that the yield on the US Treasury 10-Year note is still in the trading range set in December between 3.568 and 3.247 with Friday’s close at 3.329 closer to the low end, as Egypt could be the catalyst for a flight to quality that will compete with the Federal Reserve’s continued QE2 purchases. A weekly close richer than 3.247 signals a US bond rally.
Comex gold traded as low as $1307.7 versus my semiannual value level at $1300.6, then rallied Friday to close at $1335.0 on a flight to safety in reaction to the unrest in Egypt. Gold is now positioned between my quarterly pivot at $1331.3 and my annual pivot at $1356.5. A weekly close above $1356.5 targets the range of my quarterly and semiannual risky levels at $1441.72 and $1452.6.
Nymex crude oil rebounded from $85.11 to $89.38 at Friday’s close, as my semiannual pivot proved to be a strong magnet. If oil stops being shipped through the Suez Canal, the price of oil could spike towards my annual risky levels at $99.91 and $101.92, particularly if the unrest spreads to other
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