Fiscal Cliff  The market does not like uncertainty so as the election is over one would have expected a relief rally. But European Central Bank President Mario Draghi said that the European debt crisis is starting hurt the German economy and this became a renewed point of worry. Even though it was not new information it reminds all of the debt problem at home. In 2001 congress refused to  come to an agreement on reducing the country's debt but did agree that if no resolution was at hand that some of the temporary Bush tax cut would expire and some government spending would be reduced. It is logical of course that if you owe too much you need to make more and reduce spending so now it is only the details that have to be decided.  It is probably a given that the tax rates on the top 4% of earners will rise. The official tax rate on those earning over $379,000 is 35% though there are so many tax loopholes, intentional ones and not, that few pay the actual rate. Mitt Romney paid only 14%  on his $13.7 million in income and it is understandably a difficult  situation when there is such drastic non compliance to the official tax rates. In 1946 the highest rate was 94% and by 1981 it had gone down to 70% so todays top rates are half of that.  The small increase suggested is probably mostly symbolic as so few are affected but  House Speaker John Boehner, understanding that the population wants this to happen as they demonstrated at the polls, may agree which will boost his party's standing with Democrats. Which ever way this situation if finally resolved, the unknown will be known and this will be a plus for businesses and for the market.

As you will see below, the economic news was mostly positive this week and University of Michigan consumer sentiment index rose to 84.9, the fourth straight increase and the highest since July 2007. Intrade does not have a trade  for consumer sentiment but it would have been a good long. They do have one for if the Dow will close on or above 13000 on December 31. and today it is trading at $6.40 or a 64% chance. Up about 50% from the summer low thought it is thinly traded.

Before the election there were just tons of polls where huge money was being spend on asking people who they would vote for and it  was a tie. With Intrade the prediction is from traders willing to put their money where their mouth is and they overwhelmingly predicted an Obama win. Two weeks ago we showed in the newsletter that Obama win trade was selling for $6.28 and

by 10 PM last Tuesday it had gone up over 50% to $9.95. Their charts have many indicators such as RSI and moving averages and  perhaps in the future they will have annotation tools.

Last week the number of news lows continued to increase but there are probably not enough yet to make for a market bottom. Thanksgiving is still 9 days away and it can often have a rally, relief or a bottom is yet to be seen.  As the markets have held above the June lows the uptrend medium term continues but indications do suggest a topping for the market by 2013. On the other hand a high volume break out to know highs could start a super  a bull market extension.  Many who are worried that there will be an increase to capital gains taxes in 2013 are selling their long term winners now to pay at the current rates. After the 31 day waiting period they can buy back and if they do we should expect a big rally.

At lease for much of the manufacturing segment of the economy the recovery will not be like it has been in the past as companies need less human workers. Robotics have been used for decades and while the many robots in auto factories typically perform only one function, in the new Tesla factory in Fremont, Calif., a robot might do up to four: welding, riveting, bonding and installing a component.  

A note: in the April 16th newsletter we featured singer/songwriter Kree Woods  from Nashville and her original song Cave In. Twitter  @kreewoods She has a Kickstarter going now for the next 2.5 days to help in the release of her new album so please check it out. This is becoming a popular way for music to be made connecting you with the artist instead of the record companies..

Before we get to the charts - a really superb video.

Josh Garrels is a singer-songwriter living in Portland, Oregon who self-produces all of his own albums. He is known for vulnerability and authenticity in his music, infusion of traditional folk music with hip-hop elements, and nontraditional exploration of Christian themes. Garrels has released six albums, including the critically acclaimed, fan-financed 2011 release Love & War & the Sea In Between.  "Words Remain" written and performed here by him  is from a Mason Jar Music Presents video concert series inspired by the peacefulness and tranquility of the old buildings that continue to dot New York City's 21st-century landscape.  Mason Jar Music is a collective of music makers trained in production, arranging, composition and recording. They all live and work together in a residential studio in Brooklyn, NY. In addition to producing, recording and/or mixing records for a variety of artists, Mason Jar Music specializes in film scores, original music for film and television, concert videos, and other audio/visual productions. MasonJarMusic.com  Josh Garrels' site :JoshGarrels.com  Tweet Josh and let him know if you like his music  @JoshGarrels This is really a fine piece of music performed in a very original style. This year we have presented some amazing videos thanks to YouTube and the super artists and creators. Today's video ranks in the top tier for sure and one you will watch and listen too more than once.  

 The Labor Department released a report showing an unexpected drop by first-time claims for U.S. unemployment benefits in the week ended November 3rd, the data was likely skewed as a result of Hurricane Sandy. The report said jobless claims fell to 355,000, a decrease of 8,000 from the previous week's unrevised figure of 363,000. The drop surprised economists, who had expected jobless claims to climb to 370,000.

With the value of exports increasing at a faster rate than the value of imports, the U.S. Commerce Department released a report showing that the U.S. trade deficit unexpectedly narrowed in the month of September. The report said the trade deficit narrowed to $41.5 billion in September from a revised deficit of $43.8 billion in August. Economists had expected the deficit to widen to $45.4 billion from the $44.2 billion deficit originally reported for the previous month.

With fuel prices showing a continued increase, the Labor Department released a report showing that U.S. import prices rose by more than expected in the month of October. The report said import prices rose by 0.5 percent in October following a 1.1 percent increase in September, while economists had expected import prices to edge up by 0.1 percent. Meanwhile, the Labor Department said export prices were unchanged in October after climbing by 0.8 percent in September.

Inventories at U.S. wholesalers rose at the fastest pace this year in September, adding to evidence that third-quarter economic growth may have been stronger than initially thought. U.S. wholesalers' inventories increased by 1.1% in September from the prior month to a seasonally adjusted $494.15 billion, the Commerce Department said Friday. Increasing stockpiles of durable goods and oil drove the gain.

Crude oil inventories fell by 2 million barrels to 373.1 million barrels in the week ended October 26th. Despite the decline, inventories remained above the upper limit of the average range for this time of the year. Distillate inventories dipped by 0.1 million barrels and were below the lower limit of the average range. Meanwhile, gasoline stockpiles rose by 0.9 million barrels yet remained in the lower half of the average range. Refinery capacity utilization averaged 87.3 percent over the four weeks ended October 26th compared to 87.4 percent over the four weeks ended October 19th.

As a result of a host of concerns (looming fiscal cliff, European debt crisis, slowing Chinese economy, geopolitical issues, etc.), the Dow has pulled back from its post-financial crisis high of one month ago. For some perspective, today's chart illustrates the overall trend of the stock market (as measured by the Dow) since 2003. As today's chart illustrates, the post-financial crisis rally was especially sharp during its first two years. Since then, the rally slowed but continued to trade above support (green line) -- until now. The sharp selloff over the past two days has resulted in the Dow breaking below its 3.5-year, upward sloping support trendline. 

This past week's   sectors.

This past week's indices  -   

Now in the second month of declines, the  market does not yet look broken. During the spring pullback the Ctr., Bollinger band was tested on the monthly chart and that led to the nice rally from there. We may see that again before this pullback is over. No there is a ways to go for the S&P 500, while the Russell 2000 is almost there at the moment. Gold is green for the month and oil so far is pretty flat.

The 60 min. multi-index charts shows the top being reached on election day and then the sharp drop-off the following day, taking the price below the lower Bollinger band and then a sideways movement bringing them back inside followed by the continuation of the drop. Watch the Ctr., Bollinger bands, as a movement back above will highlight at least an attempt of a rally.

Some have become quite bearish and think the bull market is over though you can draw charts in various ways. On this weekly Dow chart we see the Williams indicator has gone below the 20 line and RSI has gone under 50 but we also see that earlier in the year and it had a nice reversal and ran to new highs. The close on Friday was 20 points under the 50 week EMA but was also right at the trendline shown which could give a small bounce.

If you use the low from the autumn of 2011 as the start of a trendline then we broke below it this week and did so on higher volume which is bearish.

On the daily chart we see the close under the 200 day EM  and also under the 50% retracement from the June low. There was indecisiveness on Friday's candal as it closed almost unchanged so could go either way but ultimately it may be better to drop to the stronger support at the 61.8% retracement and allow the RSI to get oversold as it was in June going below 30.

Here are two other views of the Dow with the volume zones on the left. These comprise the up and down volume in the price area it occurred.  The highest volume level here was at the 38.2% retrace and it stayed there for about nine days where the breakdown finally took it this week almost to the 61.8% retrace level. On this daily chart RSI went below 70 for caution or a sell near the highs in September, which turned out to be a very nice shorting opportunity.

This chart of the Dow is a bit longer term with the trendline starting at the end of 2011 and you can see it was tested this week so a bounce here would be very understandable. A break of this trendline would cause further worry and bearishness which may be what is needed to fuel a nice short covering rally.

During the week showed this char of the Dow futures pointing out this parallel channel that corresponded roughly to the 127.2% Fibonacci projection so a possible bounce point and decent risk reward as your stop would go just below. It turned out there was a good rally on Friday but it just didn't last very long.

The Dow Jones utility average really dropped this week. After falling through the horizontal and trendline supports it quickly also fell under the 200 day EMA which quickly took it to under the 38.2% Fibonacci retracement level. RSI is now back under 30 as it was the last time over one year ago from where the price ran up over 100 points.

The transportation averages and been a rather boring since early in the year so easier to just pay attention to these trend lines for the time until  it breaks up or down from them.

The NASDAQ summation index did very well at calling this decline starting from late September.

The moving average of number of new highs dropped below the horizontal support shown as the NASDAQ itself in gray dropped below the trendline which started one year ago

On this closer view we see the moving average of number of new highs has a possible trendline support just below at the dotted line.

On the weekly chart we see the close of the NASDAQ was below the 50 week EMA and it dropped below the trendline in blue. However it has held the horizontal support near 2888. A break of that can quickly take it to the 38.2% retracement level of 2764.

The 60 min. chart of the NASDAQ shows a reason why we could have a bounce here as it is at a former support level and MACD is just slightly crossed over and the histogram is almost positive.

Here are two different timeframe's but showing the same chart of the NASDAQ. First we see the trendline being broken also at the 50% retracement level that started from the June low. This then is some possible support though if it is broken look to the 78.6% level. RSI is at 37 on  this 2-day- per-bar chart.

In this daily chart we show a closer view and note that RS I went under 70 pretty much at the high of the year and is now down to 30. This is a valid bounce point though if it drops further. Look to the 78.6% retracement level and by then RS I would likely be under 30 and oversold.

Here also are two views of the NASDAQ 100 futures. In this first one we see the latter part of the rally this year took it very close to the 127.2% projection from where it is dropped to this 61.8% level.

After this decline started we showed this possible measured move target to the downside and it happened and also fell to the  78.6% level from the timeframe we used on this chart. As it closed on Friday it had dropped under this level but it will be interesting to see if it can at least rise above to retest the 2651.

The other chart that was clearly on target in calling a short sell in September was are mechanical chart for the NASDAQ 100 ETF. This chart can be found live on our stockcharts.com public page.

Another chart but for very short term trading is the altar ETF for the NASDAQ 100 here having a crossover sell on Wednesday remaining that way at the close on Friday.

The volatility index is been going up closing on Friday at 18.61 far off the June highs.

On the top of this chart we see the NYSE as it broke the up trendline, which is at least short term bearish. In the lower half of the chart are the moving averages of the new highs minus new lows and though it dropped lower, it is still above it level where we have seen bounce points in the past so worth watching.

This is also the new highs minus new lows, but in a tighter format and during the larger declines and has found support near the -100 level.

Currently only 33% of stocks on the NYSE are trading over their 50 day moving average. If this got to 20% or even below it would be very close to a logical bottom.

Are S&P 500 lazy trader chart switched back to a sell at 1409, which is 49 points above the by in June.

The bullish percent of the S&P 500 remains on a sell as it captured most of this decline from about 1440.

The S&P 500 lost 2.4% this week  as it dropped below the 20 week moving average there was a big increase in selling. The Williams indicator on top has just dropped below the 20 level and usually it needs to get lower before a sustained reversal.

This daily S&P 500 chart shows that when the 1422 horizontal support was broken, the up trendline from June was also  taken out. The small eight or nine days movement from there turned out to be a bear flag as it only had run up to the underside of the 20 day moving average. It fell out of that flag and below the dotted line support and now sits very close to possible support at both the trendline below and the horizontal bounce point from August.

Dotted line in green is the average true range of the S&P 500 with the index price itself on top. The pattern gives you rather a Mandelbrot fractal looking pattern but note typically when the average true range turns up from a base as it did before in late March, the down trend in the index picks up. We will now see if the ATR can reached the levels it did in June as this may be a reversal point.

The 60 min. chart of the S&P 500 had dropped out of an up trending parallel channel and this week is below the downtrending parallel channel. It has some possible support near  the 1360 level area

There are several variants on the public page but this 15 min. S&P 500 with 13/34 EMA's can often be a helpful guide in pointing out trend changes short term.

Another 15 min. variation shows the rally on Friday took it right back up into that blue line resistance where it also formed the top line of this parallel channel and having failed support resistance was shorted. It is helpful to draw such short-term trendlines if you trade in this timeframe to give you points for profit-taking, protection or entries.

The 15 min. mechanical chart can sometimes give many whipsaws but at others give significant gains.

This daily chart of the S&P 500 shows a parallel channel which started in June and was broken a little in September and  more so of course in October. From the June low it is now retraced 50% of that prior gain and note again the volume's zone areas to the left.

This longer-term chart starts at last December's low and here you see an up trend line  which is still in force and corresponds roughly to the 1360 level spoken of earlier.

On Friday the S&P 500 futures dropped to the 161.8% Fibonacci projection for a for short for the short term, which coincided also with the lower  line of this parallel channel and for Friday it was the S1 pivot point. When you have two or three things lining up like this it is a good risk / reward buy if it's in this configuration as your stop can be quite tight. If it fails you are stopped out and then wait for a new set up.

The Russell 2000 on Wednesday held the 200 day EMA and the 50% retracement level but lost both of those on Thursday and on Friday closed up just one dollar. Its Williams indicator is in oversold territory RSI is still at 35 and we have a negative, histogram and MACD.

For the short term the 60 min. Russell shows why a couple of point bounce on Friday. It tested  this minor bounce point from August 13. In this timeframe RSI also crossed back over 30 and it was just the slightest beginning of a MACD crossover area.

The daily chart of the Russell 2000 shows the RSI dropped under 70 very close to its high this year after having gone over 30 very close to is low in June. The close on Friday was below the 50% retrace but it is still above the 61 8%, which is worth watching.

This longer timeframe chart shows that there is also a trendline which started last December which coincides with that 61.8% level. This makes it even more interesting point to watch as there could be and expanded decline or a decent tradable rally. If it holds that support.

This 3-X Russell 2000 ETF is live on our chart sharing page each day and the RSI dropped under 70 near the high in September. This week on Friday iIt touched the 61.8% retracement back towards the early June lows. That is why we see a green candle though it would be perhaps even better if we can get RSI again under 30 like it was in June.

The Value Line index this week dropped below the up trendline that was started last June and that is bearish though there is still the 200 day EMA at 2943 and the 50% retracement level. Support at 2925.

The 30 year treasury bond prices had been in this  narrowing pattern since its high in July and broke out of it this week and also at the convergence of the 50 day EMA, 20 day MA  and up trend line in pink. All together they gave  a quick snap higher.

The banking sector had a very long red candle not seen one that long since last May. It it failed to hold the small September gap and then ended flat  on Friday. It was on lower volume so it could very well continue to drop down to the $47 support.

The retail sector itself had been quite strong, though lately there have been some disappointing results in earnings. It is trapped now between its 50 and 200 day EMA's and closed under the 38.2% retracement level. A bounce at this point would be constrained by the overhead moving averages. It could continue to at least the 50% retrace and possibly to the 61.8%, which is right at the 200 day EMA.

The Dow Jones world stock index is at an important level. If the markets could stabilize this could be a very nice entry at the test of the formerly broken trendline. Though at the same time a drop here could take it all the way down to its bottom lower trendline near 230.

They FTSE remains in the range it is been in now for a couple of months though it would turn more bearish of course with a drop below the 50  week EMA.

The Canadian venture exchange totally flat lately - showing for reference.

The Shanghai exchange composite has also been in a horizontal state of mind for some time and the longer it stays that way, the larger the move one way or another when it comes.

Our commodity tracking ETF reversed the prior week's drop with a green candle this week and slightly increased volume. The MACD however is still pointing lower as are stochastics.

This multiyear oil chart shows how tight this triangle is becoming. It is getting quite close in this long-term viewpoint, to the apex so normally it would need to break one way or the other for a dramatic move..

This shorter timeframe shows the basic parallel horizontal range it is in as it could go either way.

The crude oil futures chart also showing this parallel channel and in this case it is between the 61.8% retracement and the 78.6%.

Natural gas at its Williams indicator move over 20 and RSI over 70 at the same time it went above this parallel channel. It failed to get to its  200 week EMA and I think the longer-term bullishness remains even if it drops back into the channel as long as it maintains the $3.25 horizontal support area

The natural gas futures had several short term sell signals via RSI at highs in October and has been maintaining this descending parallel channel having dropped out of an additional bearish flag this week. It did bounce slightly from there but would need to move back above the 61.8% or the descending channel depending on when a reversal happens.

Gold has been declining and closed the previous week right at the 20 week MA so again technicals were ahead of news as we see the 3% bounce this week from that technical level as it coincides with renewed worries of the fiscal cliff.

It was a nice rally in gold from near the 200 day EMA and the 50% retracement level from last July, though it did close slightly under the horizontal resistance shown.

GLD The gold ETF closed just under its a ascending parallel channel and if it breaks back inside of it, it has horizontal resistance just overhead.

GDX gold miners ETF also inside a rather loose channel, but a cleaner trendline overhead worth watching for an increased volume break higher.

Our mechanical chart for GDX also shifted back to buy so a continued rally in gold would be quite helpful.

Silver also bounced strongly this week closing up 5% moving from the 20 week moving average and closing back over the 50 week EMA. The volume improved so that suggests some continuation for a move higher.

The silver ETF mechanical chart being a little slower to respond showed only one  green bar and a second would likely move it back into by.

Copper closed right at the 200 week EMA and if it drops lower look for possible support at the, not perfectly clear, trendline just lower.

The euro continued its pullback this week losing almost 1% but it remains over its 20 week moving average.

The euro futures had a nice little flag but it was very clear on the break as it was also the 38.2% level. And of course earlier it was looking bearish as RSI had dropped below 70 on the last move up.

I was asked this week as the dollar and move higher if this would hurt gold. At  some  points in history you could easily say yes as they moved in opposition. This chart however shows that gold in gold color and the US dollar in green and red, in some short term times  can actually move together.

On the monthly chart we see the 1.39% gain this month in the dollar adding to the bounce from the yellow line support.

The US dollar weekly chart up until two weeks ago looked like it may be making a bear flag but with this second week of breakout over the 50 week EMA it shows it was not. Not drawn here you see it is getting close to some possible resistance of what were the former lows during June of last summer. MACD is however about to cross over and if it does so, and the histogram becomes positive this would be bullish for the dollar.

And the daily US dollar as the 50 day had dropped under the 200 day in October it is now about to cross back over which would be bullish but still will watch the green dotted line resistance.

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Check the updated Earnings Calendar on all overnight holds.

This week's economic calendar for the USA.