10/4 Daily Commentary

The commodities complex looks toppy as well as currencies.  The whole market structure will move as one when the expected shift to risk avoidance (deflationary impulse) occurs.  Deflation is risk avoidance, pure and simple.  Risk acceptance and risk avoidance are patterned behaviors that are imbedded in the subconscious.   Technical analysis cannot predict when these switchovers occur.  Markets may become overbought, have mild selloffs, and resume inflationary impulses for years.  This is due, to a great extent, by the ability for credit to expand.  However in today's world the normal force-feeding of monetary and fiscal policy is not able to expand credit, only to expand money.  Without the multiplier applied to lending activity the inflationary impulse cannot get going and risk markets cannot expand for prolonged periods.  I1 indicates that this is a structural shift in psychology throughout the economy that will persist until May, 2015 with brief, periodic bouts of optimism. 
Moving up the Euro stop order to Dec. 136.35.  Keeping the sell limit at 138.18.  Euro cash rallied to new high overnight at 138.06 but was unconfirmed by futures.

The stock market critical support is still at DJI 10,675.  There is a futures corollary to this M/A that will trigger at Dec DJ futures 10,615.  I'll be monitoring this tonight and short if broken.
I still have doubts that the stock market can make it to 10/8 without breaking support.  I left the stock market Thursday at SDS 29.84. 
Crude oil is coming up to an expected top Wednesday/Thursday in it's sentiment gauge.  I am looking to go short crude then and will post the charts at that time. 
Treasuries are in an extended period of bullishness with their sentiment gauge peaking at a high level above 2 in November.  This is a buy period indicating an extended rally according to Bond Market Trading Rules.  This top will coincide with a stock market bottom.

The sentiment gauges line up this way:
1)   I1 has been in decline toward a low in mid-November.   It is currently in a shallow bounce that will end 10/7-10/8
2)  Crude will be peaking 10/6-10/7 in it's sentiment gauge
3)  Treasuries will continue their advance but the motivation behind will not only be that the Fed will continue buying but that they will be a safe haven
4)  Euro weakness is expected, with the cash chart completing the final 5 up last night
These markets are aligning for a major sentiment turn.  I1 is the most accurate of these gauges, but if the stock market breaks critical support then the other positions are also warranted.