The market was dragged lower by the banking sector after news that one of the largest rights issues ever will be placed in the UK. The banking sector was already vulnerable because of the ‘sell banks, buy resources’ switch that we’ve mentioned over the last few weeks. From the early highs the market dropped 78-points and closed on its lows. Not a good performance. Resources held up okay but the likes of Gold is now getting a little parabolic so caution needed. I tightened up my trailing stops on my own Gold position today. The other concern is the divergences between the broader US indices and the majors. The Dow Jones Tranports is still wallowing below the highs and unwilling to confirm the Industrials recent strength. The same is true for the Russell 2000 and the Wiltshire 4000. In other words the market is not having a broad based rally and until this divergence corrects itself I’d be very cautious. Todays inability to hold gains flipped the daily trend back to negative again. We’re clearly sitting on a line of ‘make or break’ with the trend. It may well stay this way for the coming month.
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