Bulls kept bears out of the game for yet another day as the rally powered higher. Small Caps built on their leadership (note relative strength to the Nasdaq) as the MACD trigger line climbed to new 6-month highs. While markets may not necessarily head down tomorrow bulls should be looking for a test of the 20-day MA before another challenge of highs is made.

Governor Bollard from the RBNZ stated last night that they do not anticipate ‘hiking interest rates until mid-year’. With the SNB this morning, the market will be focusing on their policy on FX intervention in EUR/CHF. Economic indications and inflation forecasts ‘did not require’ the sort of intervention that surprised and upset the markets last year. There is no doubt it, Hillenbrand ‘does not want to see a strong CHF’.

The concept of entropy is one of the most useful terms for understanding just about everything. While it has its origins in natural law — thermodynamics, specifically — the concept holds true pretty much across all closed systems.

In the simplest of terms, every closed system will ultimately degrade toward a state of maximum entropy.

The stock market is higher again this morning, defying those who continue to call for a pullback. I have been talking about how even though the market had become overbought, instead of pulling back it mostly went sideways while the overbought condition got worked off. This was a positive sign, and as you can see in the chart below, the oscillator has confirmed the recent highs in the market by making a higher high.

Riskier Assets in Demand; Europe Debt Worries Remain

Investors raised their appetite for riskier assets during yesterday's trading, but still avoided European and British currencies because of debt worries. The big gainers yesterday were the AUD and CAD, both currencies are linked to commodities, in particular crude oil. Crude oil had recently gained in positive momentum, although it closed slightly lower yesterday. The question remains whether the EUR and GBP will attract some of the appetite for riskier assets.
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USD – USD Firm against EUR; Declining vs.