Stocks Explode Higher As Small Caps Lead The Way

Stocks rallied strongly today with every major index sharply higher. Over the past 2 weeks the Russell2000 (small caps) have been leading the stock market higher as can been seen in the rising relative strength line in the lower panel.

Stocks usually put in a significant low around October and rally into the end of the year. This is a strong seasonal tendency that happens more often than not. I personally did not catch this move at all even though I was anticipating a low due around October. . I've been long several times which was profitable but I also shorted at resistance whch turned out to be a disater.

As you can see in the above chart, the small caps are now testing major overhead resistance. The NASDAQ, Dow and S&P have broken above most of their resistance levels. It will be interesting to see how the small caps handle this major resistance zone.

Overall I am looking for a retracement to buy. I'd like to see a one third pullback but for now I'll just take one day at a time and see how things unfold.

Gold Surges Higher

The gold market rallied sharply today closing above the recent trading range. The ETF GLD which tracks gold showed a nice increase in volume confirming the breakout. You'll notice that the recent consolidation developed right at key support (green line)  which tells me that the bulls are once again in control of this market.

If you look at the commitment of traders data (not shown) you will see that the commercials are holding a bullish position relative to their recent activity over the past 2 years. In my opinion I feel we will see gold move much higher in the weeks to come.

Euro - Turns Lower

Last week I wrote about the heavy resistance area the Euro was testing. This resistant zone is a combination of Fibonacci retracements as well as a support low from a few months ago. As you can see in the above chart, the Euro put in a reversal bar today suggesting that lower prices are likely. A move back above today;s high would negate the bearish outlook.

AAPL ( Apple Inc) - Watch This Stock Tomorrow

Apple Inc (AAPL) is one of my favorite stocks to trade mainly because it's so liquid and it is a leader of the NASDAQ due to its heavy weighting within the index. The reason I will be watching this stock tomorrow is because we now have an inside day. An inside day is simply a day that has a lower high and higher low compared to the previous day.

What I like about inside days is that they sometimes trigger a trending move. What I find interesting about today's setup is that today's range happens to be the smallest range in at least 10 days. .Small ranges give way to large ranges which is what a short term trader is looking for, after all we do need movement in order to make money. Volume was also relatively low today compared to recent days.

Tomorrow (Friday) I will be on the look out for a breakout in either direction.  I'm hoping for an unchanged  open and then a breakout. We'll see what happens. Today Apple Inc. (AAPL) closed at 408.43 which was up 6.24 or 1.55% from Wednesday's close.

British Pound - Tests Resistance

Above is a daily chart of the British Pound vs The U.S. Dollar (GBP/USD). This currency's technical picture is very similar to what the Euro is doing right now. The British Pound is at the .382% retracement from points A to B. This Fibonacci number also coincides with major resistance. This is a powerful confluence of technical resistance so be on alert for possible signs of weakness here.