Let's start with the equity markets:
As I mentioned in yesterday's post, the IWNs were already on technically poor ground. Today, they closed right at key support around 65. The QQQs -- which were above the 200 day EMA -- moved through that technical bell weather and are now below an upward sloping trendline started about a month ago. The SPYs moved through the 112 area during the session, but rallied just a bit to close above. In short, today we saw a lot of technical damage done to the market. Most importantly, going into tomorrow (which is Friday), we have a nervous market that probably won't want to hold positions over the weekend. Don't be surprised to see more selling.
In contrast, we have a treasury market that is rallying. The IEFS and TLTs have both moved through upside resistance on very strong volume -- especially for the treasury market. Both have bullishly aligned EMAs and are clearly catching a safety bid based on the equity sell-off, the fed's move into a longer portfolio and a general risk off trade.
The dollar rallied hard, but formed a spinning top on high volume. My guess is we'll see the dollar pull back to support right around the 200 day EMA -- or at least the 10 day EMA -- before we see a possible move higher.
Let's recap:
Equities: the IWMS (risk based trade) closed right around key support. The QQQs broke support and the SPYs hit support and then pulled higher. All printed gaps lower (The SPYs was very large) on high volume. This is clearly a flight from the market in a big way. Here is a chart of the weekly SPYs with important Fib levels:
Notice prices are currently at key levels and that there is additional support at the 110 level.
Notice the IEFs and TLTs are now at higher levels than during the recession. That is a very ominous sign.
Bottom line: this is a terrible week; it does not bode well.
