Thursday, November 17, 2011

Morning Market

Today I want to start with oil, as its rally is ongoing.  Prices moved through the 102 price level, but have fallen back in a standard profit taking move.  Notice the strength of this rally; all the EMAs are moving higher, prices are above the 200 day EMA and there have been periods of profit taking along the way.  There is technical resistance at the 104 area, but aside from that, there is very little stopping the upward advance.  This is important because at some point, this will translate into higher gases at the pump.

For the last few weeks, equity prices have been in a sideways trading pattern.  However, yesterday we may have seen a break.

The SPYs printed strong downward bar that moved through the lower line of the consolidating triangle and the 200 day EMA.  The only support we see is at the 50 day EMA.  However, this occurred in very low volume, indicating a lack of urgency on the part of traders.

We see a similar move in the QQQs, with prices being a bit closer to the 50 day EMA.

But we see that the Russell 2000s are still within their trading range.

It's important to remember that the equity markets -- together -- comprise an entire data set.  We need to look at all three major averages (SPY, QQQ and IWM) to get a clear understanding of the overall market direction.

At the same time, we're not seeing a really strong rally in the Treasury market.  The IEFs are still above all their EMAs, but we're not seeing any major new advances and volume is incredibly weak.  Ideally, if we were going to see a massive stock market sell-off, it would be accompanied by a Treasury market rally as traders made a flight to safety.

The dollar is still in an upward sloping channel, with prices just above the 200 day EMA.  The shorter EMAs are in a tight bundle, indicating there is little direction in the market right now.