As Barry said yesterday, it's all about the bounce -- or, more specifically, the price action from the 112 are. This is the third time prices have hit the 112 area. In trading parlance, that means we really, really really need to see prices make a strong advance through the EMAs or we've probably got serious problems. Yesterday's bar was fairly strong, but it hit resistance at the 10 day EMA and printed on fairly weak volume.
The tehnicals are fair. The A/D and CMF show money moving into the market, but the MACD is in negative territory and has given a sell signal. Additionally, the overall macro environment is extremely bearish, meaning traders are more likely to sell into the rally than participate in it.
This is interesting -- despite the strong move in the dollar, we're not seeing a corresponding move in the A/D or CMF. In fact, the overall A/D trend is down and the CMF is neutral at best. In fact, despite the very important and strong technical move, we're seeing pretty weak technicals on the dollar, which makes me think the underlying rally is weaker than anticipated.
As with the dollar, the IEFs underlying technicals are also surprisingly weak. The A/D line is moving horizontally, the CMF is decreasing as is the MACD.
The above technicals indicate we need to possibly rethink the following:
1.) The strength of the dollar rally. Without an accompanying advance in the A/D and CMF, we're seeing shares advance on weak participation. That means there isn't a lot of excitement to this rally.
2.) The strength of the Treasury rally, which indicates there has actually been a lack of participation as well.
