The normal trade in the markets has changed in the last week. Most markets are reversing from the normal grind higher. The dollar is moving higher, while gold and other commodities are dropping. The stock markets are also weak right now and major trendlines have been broken.
The markets have been hyped to extreme levels and now they will be put to the test. Has reality set in that the economy might not be as strong as many analysts have been expecting? Is it time to finally pay the piper or will the government step in with even more stimulus?
I have to say the stock markets sure look like a top is in. If the top is taken out in the near term, it probably won't run much from there. Commodities are also in a precarious situation. The dollar should gain strength in the near term, which puts pressure on commodities. I can't see the dollar moving much higher in the long-term, so commodities should fare much better than stocks.
The GDP numbers for the 3rd quarter will be released Thursday. This could make for some interesting market movement. I would be defensive at this point in my trading, but a bounce should be in store by the end of the week. Gold, corn and several commodities broke trendlines. This is one of those times where investors and traders are trying to decide if this is a correction or a change in trend. Only time will tell, but I'm expecting at least a short-term change in trend.