Tuesday, April 27, 2010

Yesterday's Market

I'm going to change some things around on the site. First, you'll notice that the "big story" section of the blog is gone. The reason is simple: I am becoming more and more involved in "inter-market analysis," meaning the inter-relationship of all the financial markets. For example, as good economic news has been coming out we've seen equities rally. This has placed downward pressure on bonds. In addition, a stronger equity market means a stronger dollar. In short, all markets have an effect on other markets, so I am going to expand the yesterday's market section to include an analysis of a wider range of markets from the previous days action.

That being said:

The real action yesterday was in the bond market. With a huge auction on tap and and FOMC meeting, traders were in a selling mood:

Prices gapped higher at the open (a) but quickly fell (b) on heavy volume -- there were 4 trades before 10:15 CST that totaled more than 100,000/shares. Prices consolidated in an upward sloping channel, but fell again (d) on lighter volume. Prices rose in the afternoon on slightly higher volume.

Also consider this chart:

Prices topped out last Thursday and have fallen to find support right at 90. We've seen two consolidation patterns (b and c) right above 90.

The SPYs had strong support at (line "a" or ~121.65) but couldn't hold support and made an equal distance move at (b) on stronger volume (c). Anytime prices can't hold until the end of the day, it signals that traders are concerned with overnight developments. Currently, those are Greece and the FOMC.

Oil drifted lower all day. Oil is caught between strong counter-trends. On the bullish side we have a world economy that is growing, thereby implying higher demand. However, the weekly Petroleum report has shown a continual build of supplies which is bearish. And the dollar has been rising:

which is commodity bearish.