Wednesday, October 6, 2010

Yesterday's Market

On the daily chart, yesterday's price action was incredibly important because prices broke through key resistance on several fronts. For the last week or so, equities and bonds have been competing for investor's attention, with bonds taking just enough away from equities to keep equities from moving higher. Yesterday may have ended that situation.

Also note there is a ton of empty space above the SPYs, indicating prices have room to run.

Yesterday, prices gapped higher at the open, and continued higher all day. Along the way, there were several consolidation patterns (b). This is a very strong chart.

The primary market holding stocks have is the bond market. Notice that while prices are still below the main uptrend, they are still clustering in a high position, giving no indication of selling off. So long as fixed income can pull money away from equities, a possible upward break exists on the equity markets.

The dollar is in a clear downtrend. In the last ten days, there have been three downside gaps (a, c and d) and one big move lower during the day. This has very bullish implications for the commodities markets.