Inflation data came in waeker than expected and the market opened with a huge gap to the upside. The Dow was up 700 points in the first half hour and then proceded to give most of it back. The most watched index still managed a gain of 103 points on heavy volume. The advance/declines were better than 2 to 1 positive. The summation index is beginning to track sideways. It was a volatile and crazy session. The bears are at their last line of defense as it looked like we were going to break the long term down trend line on the S&P 500. Once again the 4100 level proved to be a barrier as prices were repelled from that level. The short term indicators for the S&P have turned up though and if the Fed comes in dovish perhaps we'll get through the resistance. Taking out that trendline on good volume would lead to more gains and put an end to the longer term decline in my view. Hasn't happened yet but that's what we've been leaning towards. Gold rallied on the inflation news as the futures were up $30. The US dollar was lower along with interest rates. The XAU was up almost 3 points, while GDX rose 7/8. Volume was good to the upside. GDX remains short term overbought so we are waiting to purchase the January calls there. But the interest in owning the gold shares now isn't slowing down as the market has stayed overbought since the beginning of November. The trading is never easy. Mentally I'm feeling OK. The VIX had quite a range today and was lower which fits the up move in stocks. The short term indicators have rolled over which implies more price gains to come. But anything can happen here which is why we'll be keeping a close eye on tomorrows developments. A hawkish Fed speech could bring things right back down again. Todays price action could have left no doubt that we're heading higher in the near term. But the selling took over at resistance which is why we'll be cautious for now. Wednesday will be an important session for prices going forward. Europe and Asia were higher overnight. We'll see what tomorrow brings.