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Markets Unlikely to Hang On Until Month's End


There's a good chance we'll begin to see weakness next week.

Editor's Note: Toby Connor is the author of Gold Scents, a financial blog with a special emphasis on the gold secular bull market. Mr. Connor's analysis skill of the markets is largely self-taught, though he admits to being an avid reader of Richard Russell and Jim Rogers, among several others. Toby is an avid rock climber and world class weight lifter (for his age).

Today will be the 28th day of the rally out of the February 5 bottom. We're now in the trading band for the daily cycle in stocks to bottom. (The cycle rarely lasts much longer than 35-40 days). So, as I said in my last post, Are Markets Setting Up for Runaway Moves, we're due for a short breather any time now.

The consensus seems to be that the market will hang in until the end of the month. It may, but I tend to think we've probably seen about all the upside we're going to see at this point.

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The leading tech sector is pushing up against a major resistance level. I doubt this level is going to be penetrated on the first try.

It's time for RSI to make a trip back down to the oversold levels. (Daily cycle bottoms almost always push the five-day RSI into oversold levels.)

Starting sometime next week, the market should begin a minor profit-taking correction to ease overbought technical and sentiment levels.

I expect this will rub off on the precious-metals sector as well (it almost always does).

That should result in a 1-2-3 reversal process in the miners and gold.

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The expectation is for both gold and miners to hold above the February lows and then move to higher highs as the market rallies out of the cycle bottom.

I wouldn't be surprised if markets bottom on the next employment report on April 2. That would allow the market time to ease the overbought conditions and set it up for a powerful rally through earnings season.

So I guess it's possible the market hangs on until the end of the month, but I doubt it. I suspect we're going to start to see weakness next week.
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