Photo by JR Lancaster

Have the interest rates finally bottomed? If so, will that take the market’s somewhere-over-the-rainbow rally down a dead-end?

After closing last week on new all-time highs, this week begins with TLTs (20+ Year Treasury Bonds) closing slightly below Friday’s lows. A healthy correction or the foreshadowing of a coming change in Fed policy?

After all, not since July 2014, almost a perfect two-year anniversary, has the TLTs traded below the two-year moving average. It hasn’t traded below the seven-year moving average since December 2013.

If you were the Federal Reserve watching rising commodity prices with predictions of those prices to rise even more into 2017, what would you do?

If you were the Federal Reserve and saw unemployment numbers dropping and the DJIA ticks away from new all-time highs, what would you do?

Technically, Monday’s price action in the bonds has the potential for a make or break day if confirms or not on Tuesday. The fundamental picture though, is not as simple.

The US dollar strengthened, which does present some obstacles for the Fed. Should the Fed defy most predictions and raise, the dollar will strengthen further. That could send commodity prices plummeting, which in turn could resurge deflation talks. On the other hand, if world demand for goods rises, cheaper costs of those commodities are advantageous.

A stronger dollar also makes the cost of US goods a lot higher for export. That in turn will negatively impact the positive US economic data. Messy. However, since we are already losing out to cheaper made imported goods, perhaps not so much.

Of course, the US has legitimate concerns over the European climate as well. Nevertheless, with historical relationships ever changing, the fundamental landscape is that much harder to predict.

The odds makers believe the Fed will keep rates status quo. Just in case they’re wrong or if (also predicted) the Fed winds up losing control--

What does a technical trend reversal look like? 5 Classic Signs:

1. Island top
2.  A blow off top depicted with at least double the average daily volume onto new highs.
3. A new 60+ day high, followed by a close in the lower 25% of the intraday trading range, which must confirm the following day with a move and close below that level.
4. Double and Triple Tops
5. Phase change to warning with acceleration, confirmation and volume

“The higher that monkey climbs that tree
The more of his buttocks you'll see
This must be... the rainbow's dead-end.” James Reyne: The Rainbow’s Dead End

S&P 500 (SPY) Made a new all-time high intraday. 212.50 next support level.

Russell 2000 (IWM) 118.64 the 2016 high. Today’s high 118.43. Even if seems unlikely, always watch for classic signs like a double top until it’s not.

Dow (DIA) 183.35 the all-time high-came close but not enough. Best support underneath 180-or 18k in the Dow.

Nasdaq (QQQ) Could not take out the 2016 high 111.44 intraday. 108.50 the next underlying support

XLF (Financials) Needs to close over 23.07 and hold 22.70

KRE (Regional Banks) Looking at 38.75, it closed just there. A start under 38.60 tomorrow could be an overall sign of weakness.

SMH (Semiconductors) New 2016 highs. Determined but still a distance to all-time highs.

IYT (Transportation) I would not feel good about the market if this breaks 137.30.

IBB (Biotechnology) Could not fill the gap to 273.36. And closed red. That KRE IBB the brothers not joining in as they should with SPY on new highs

XRT (Retail) Look here and Granny looks better if can hold the 200 DMA another day at 43.39.

IYR (Real Estate) Relentless.

GLD (Gold Trust) Saw some gold bears again today. All I see is a quiet inside day.

SLV (Silver) 19.33 the 200 WMA which matters most at the end of the week.

GDX (Gold Miners) 31.35 the last swing high in August 2013. 28.44 support or the low of the runaway gap day

USO (US Oil Fund) 10.47 is the low before it took off.

OIH (Oil Services) Holding the weekly moving average. That means if USO gets moving, this is a great place to buy.

TAN (Guggenheim Solar Energy) Confirmed Recovery Phase and good volume-now it has my attention.

TLT (iShares 20+ Year Treasuries) 141.70 gap low

UUP (Dollar Bull) 25.07 the 200 DMA resistance. 24.70 support

FXI (China Large Cap Fund) 34.60 the 50 week moving average to clear