Friday, December 2, 2011
Looking at a chart of the SPYs, we see that prices have formed a symmetrical triangle. However, while we see a technical compliance with this pattern, it's a moderately weak formation. Notice that for a period of about two weeks, prices clung to the upper trend line. Ideally, in a triangle formation, we'd like to see clean hits followed by a more away from the trend line. And while we do see strong volume on the break-out move, the fundamental back-drop is less than encouraging. I personally don't think there is any positive reason for the recent coordinated bank liquidity move. In addition, the EU situation continues to hang on the precipice. In short, I wouldn't be trading this as an upside break out just yet. Prices would need to move through the 129 price level before I'd commit to the rally.
The longer (IEF) and long (TLT) end of the Treasury curve also appear to be consolidating.