Today, the risk trades were back in force with the US equity markets roaring higher once again. That had most commodity markets seeing hedge fund money flowing in after it all flowed out for the past two weeks.
In the process, the CCI was able to move back above the broken support level shown on the chart which set off the double top alarm bells. This is a significant development as it shows that the bulls are not yet ready to throw in the towel on the commodity sector as a viable asset class. Here is the key however - today's move was impressive but there are still two days remaining in the trading week.
How this index closes Friday afternoon will be a very big deal. If it can hold this level which comes in near 640 and stay above that, preferably moving above the previous week's high at 650 while so doing, it would give us the very real possibility that a bear trap was sprung and this index is going to try pushing back towards 660 for starters. That would immensely benefit both gold and silver bulls.
Should the index fail and drop back below 640 for the week on the close, the bears would have dodged a bullet and the bulls will be back on defense.
By the way, the long bond chart shows the return of risk trades in today's session with a huge downside move forming a bearish engulfing pattern on the daily chart. Whether that holds is anyone's guess. As manic as the hedge funds are, they could stage an outside day reversal to the upside tomorrow. However, after having moved nearly vertical for the past 5 weeks, the bonds are overbought technically giving traders a reason to book profits based off the bearish chart signal today.
I would feel a bit more confident about a breakdown in the bonds if we get some followthrough selling in tomorrow's (Thursday) session. They are still above the 10 day moving average and need to at least take that out to get the bulls wavering a bit further. Also note that the bonds have completed a move to the 50% Fibonacci retracement level from the decline off the late October high where they promptly failed. The bulls will need some ammunition to prevent some bears from getting a bit more confident.