Thursday, September 29, 2011
In yesterday's market wrap, I commented on the importance of looking at more than 1 equity market -- especially the risk based markets such as the IWMs. Yesterday we see that prices retreated to support levels, printing a strong bar. This is a very important development, because it indicates investors are moving from the more risk prone areas of the market -- especially when times get bad.
The IEFs are right at support. This is a very interesting development, as the IEFs have been a beneficiary of the "flight to safety. However, prices have been inching up, not rallying strongly. Remember that the 10 year is in fact at a negative yield after accounting for inflation, thereby making the rally one entirely oriented towards capital gains. At some point, the negative yield will get noticed by investors.
Oil is still in a very negative position. After breaking an upward trendline, prices have run into support at the 80/bbl level. They tried to bounce higher yesterday, but couldn't move beyond the 10 day EMA. With all the EMAs above prices -- and traders concerned about the pace of economic activity, there is little hope for a strong oil rally anytime soon.