Thursday, October 21, 2010

Yesterday's Markets

Yesterday, stock prices opened higher (a) and rallied for most of the morning (b) using the EMA as technical support. Prices consolidated gains in the afternoon (c), although there was an attempted sell-off at the end of trading on increasing volume.

On the daily chart, prices printed a very strong bar yesterday, and are clearly in a strong uptrend (a). Also notice the EMAs are in the most bullish orientation possible -- the shorter are above the longer and all are moving higher.

The Treasury market opened lower (a), but then moved higher, hitting resistance in the area of previous highs from yesterday (b. Prices sold-off in the afternoon in a disciplined downward move (c).

On the daily chart, notice that Treasuries have broken two uptrends -- the first (a) started about six months ago and the second over the last month (b). However, prices are now moving sideways, largely as a result of QEII from the Fed.

The dollar has hit resistance at the 20 day EMA and moved sharply lower yesterday. This is to be expected, especially with QEII on tap.

Cattle is in an up (A), correction (B) and up (C) pattern with a buy signal from the MACD (D). The USDA's announcement that downgraded this years corn crop is added an upward bid to corn, which is the primary feed for cattle. More expensive food = more expensive cattle.

Copper is still in a very strong uptrend, with two primary trends supporting prices (A and B). However, the MACD has just given a sell signal (C). This bodes well for the economy, as copper is a basic ingredient in most everything.

QEII is a big story driving all the markets right now. It implies more stimulus is on the way, which is bullish for stocks. It places a bid in the Treasury market which is bullish for bonds, but it is bearish for the dollar, which in turn is bullish for commodities.