Critical turning points may be at hand

Critical turning points may be at hand

Various markets and indicators have reached critical turning points, where the current risk rally will either stall and potentially reverse, or break through and see gains extend. Chief among these is the VIX index, which has dropped to the 38/40 level, which has been the floor for the stock market's so-called fear index since the end of September. A drop below that area will likely signal further gains in shares. The S&P 500 closed above the top of the daily Ichimoku cloud and the 100-day moving average for the first time since June 2008. Those levels need to be sustained for further gains to unfold. Gold has closed below its Ichimoku cloud bottom at 904.44, but still needs to take out key lows between 875/885, and a drop through there would also suggest further improvement in risk appetites. The USD index is still inside the cloud, but a bearish crossover suggests a drop through the cloud base and further USD weakness may lie ahead. EUR/USD looks similar, but in reverse, and a daily close above 1.3438 on Monday may open up further gains that would likely exceed last week's highs at 1.3740. USD/JPY closed above its 200-day moving average at 99.16 and is currently above its cloud, as are all the JPY-crosses, but the crosses are still below their own 200-day moving averages. Clearly some significant technical hurdles have been cleared, but the question is will they be sustained?