9/24/09

Yesterday's action in the stock market, closing lower than the previous day after making a new multi-month high earlier in the day, may have a significant impact on the near term outlook in the equity markets. A new high, then closing lower than the previous day, is a technical key reversal. Whether it is meaningful depends on today's trading, a lower close will add to the view stocks may finally be setting up for a major correction. Many times a key reversal pattern leads to a change in direction, but there has to be a lower close today to add conviction and confirm the reversal yesterday. Significant for the rate markets; to drive mortgage rates lower the bullish bias in equities has to be shaken.