As we suspected, the market pulled back on Friday after the end of quarter reporting period on the 30th of September 2010.October is usually a very good month for stocks, and September usually not such a good month for stocks. But in this market, September was indeed a very good month closing 8% higher. So will we see a bit of a pullback in October?
As we can ascertain from the graph above, we're currently trading near the yearly high around the 29500 mark. From our stochastic indicator we deduce that the market is currently in overbought territory, and we need positive news to push us above the 29500 mark.
The markets are awaiting news out of the US on Friday when they deliver their unemployment rate for September, which could move the market significantly.
The current market direction is primarily dictated by the strength of the US Dollar. If it weakens, resource prices go up, i.e. copper, gold, silver, etc. If the US Fed decide to put more stimulus into the US economy, it could signal that the recovery is not as strong as it seems, and could influence the sentiment in the market.
It would be prudent to take some profit from your long positions and see if the current rally continues. Short positions are not advised as of yet, as the trend is still on the up.
Safe trading
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