There will not be too much commentary today as the charts are displaying themes which have been covered here at some length in recent weeks.

Just a general observation, statistics are revealing that there are not only signs of life in key economic data, but the release of inflation data in China, India, even the EU and UK on Tuesday morning are getting a little too hot for comfort. And this is happening just when almost everybody assumed that buying fixed income instruments was a one way bet.

Whatever happened to the not too hot/not too cold characteristics of a tepid recovery that made bad news good news for markets?

The Shanghai exchange took another 4% nosedive in Asian trading but now has reached a potential chart support level which also coincides with the 50 day EMA.



The 62% retracement level on the S&P 500 cash index at 1228 has revealed itself to have been a key resistance barrier and at present the balance of probabilities suggests that further downside testing is now likely.

We shall soon discover whether the mantra "don’t fight the Fed" -- which clearly wants higher stock prices to make us all feel wealthier -- is starting to lose traction. As previously suggested if forced in to a position on this I would still err on the side of favoring higher asset prices as Mr Bernanke will prioritize that objective over any concerns about inflationary forces becoming more of a concern down the road.



Yesterday I suggested that for the yield on the 5 yr UST to have moved up 30 basis points since November 4th, well we can now add even more surprise to the fact that after yesterday’s session it actually moved up 50 bps from the intraday high to the low on November 4th.



The Hang Seng Index has fallen back below the 62% retracement level.

 

Clive Corcoran is the publisher of TradeWithForm.com, which provides daily analysis and commentary on the US stock market.