Given the remarkable recovery and reversal in the US equity markets yesterday it is legitimate to ask the question - have the lows of January been successfully tested?

To be honest I don't think anyone would take whatever answer I was to give to the question very seriously because this market is too full of surprises for anyone to provide anything other than a guess. It is hard to believe that Standard & Poor's who were consistently wrong leading up to the current crisis in the asset-backed securities arena should be that prescient in calling a bottom in the sub-prime mess.

Another sobering thought is that the fall-out from the collapse of Carlyle Capital Group (and others waiting in the wings) is likely to end up in the Fed's portfolio in exchange for Treasuries. Perhaps the Fed is acquiring really good assets at the bottom of the market but it does raise questions about what the function of the central bank is.

Back to the charts and the Nasdaq 100 (^NDX) faces hurdles at the 50-day EMA currently around 1825 and a very firm and long-lasting resistance line near to 1850.



One of the most revealing charts is for Germany's DAX index (^GDAXI) which shows a hammer candlestick with yesterday's intraday low at almost exactly the same level touched on January 23. It looks just a little too neat for me to conclude that we have avoided the drop down to new lows.



Comex Gold futures surged above $1000 per ounce yesterday satisfying the target that I have discussed here several times. If gold keeps moving higher then the trend for the long end of the yield curve, once some of the panic in the credit markets dissipates, and for the utilities sector cannot be too rosy.



Clive Corcoran is the publisher of TradeWithForm.com, which provides daily analysis and commentary on the US stock market. He specializes in market neutral investing and and is currently working on a book about the benefits of trading with long/short strategies, which is scheduled for publication later this year.

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