Yesterday's Market

One of the central themes of the markets for the last month or so has been "is it going to reverse course?" Remember, the current market structure began with a drop in the euro, which led to a rise in the dollar and Treasuries (which caught a safety bid) and a drop in equities and commodities. Equities dropped largely because of their higher risk factor and commodities dropped because of their higher risk factor and their being priced in dollars.


Yesterday I noted the 110 area provided a great deal of technical resistance. Yesterday, prices blew through that level. Also note the 10 and 20 day EMA are increasing and the 10 day EMA is approaching the 20 day EMA.


On yesterday's daily chart, note prices gapped higher at the beginning of the day, then used the 20 minute EMA as technical support for the remainder of trading. Finally, prices closed at their highest level on a nice volume spike. Simply put, this is a textbook rally.


Industrial metals also broke through important technical resistance yesterday (a). Also note that for the last month and a half, prices have been falling on decreasing volume (c). Finally, notice the EMA picture is in the initial states of a turnaround (b) -- the 10 day and 20 day EMAs are rising and the 10 day EMA is about to cross over the 20.


On the daily chart, notice the up (a), consolidation (b) and further up (c) pattern.



However, we are still not seeing a complete end to the flight from safety trade, as the Treasury market is still near technical support, consolidating in a triangle pattern.



Gold looked to be printing a double top (a). However, the recent increase puts a dent in that theory. While there is still a strong uptrend in place (b), the technical indicators indicate a certain amount of weakness -- the MACD is moving sideways (c), the A/D line printed a lower number on the second top and the CMF is also dropping. I should add that I think chart information (price, candles and EMAs) are more important that the lower indicators, but that doesn't mean the indicators don't tell us meaningful information.


Finally we get oil which is clearly in a reversal. After bottoming, prices formed a downward sloping wedge (a) before continuing its upward move. Also note the 10 and 20 day EMAs are increasing and the 10 day EMA is about to move through the 20 (b). Also note the MACD is increasing (c). Ideally we'd like to see the A/D line rise with prices (d), but at least it's not decreasing. Finally, the CMF indicates money is flowing in.