Morning Market

Just to review my overall analysis of the economy and the markets.  I turned more bullish on the economy last week.  I outlined my general thesis here.  There are several key points to the argument, with the first being the drop in initial unemployment claims followed by the general steadying of the employment situation and the rest of the economy holding its own.  The real wild card is Europe, where a wave of defaults across the region would obviously cast a very dark cloud over the US.

As for the markets, we've seen the equity markets move higher and a sell-ff in the treasury markets.  The dollar is still doing well and copper has made a comeback.  Last week, the leading market sectors were energy, technology financials and consumer discretionary, so traders are making bullish economic bets.

Moving forward, the big concern is to look for economic and market weakness.

Let's start with some equity charts:

The QQQs are in a bullish orientation.  Prices consolidated in a symmetrical triangle and then rallied through October highs.  The EMAs are bullishly aligned, money is flowing into the market and momentum is positive.  However, given last week's advance, I would expect a pullback sometime in the next few weeks as traders catch their breath.  Also note some general profit taking is probably in order.

The QQQs weekly chart shows that last week's price action printed a strong bar.  Also note that the A/D and CMF line have not turned negative over the last year, although the market as a whole has been weaker.  This tells us that money has not left the market, but new money has not come in.  Finally, the MACD is in a position to move higher.

The SPYs daily chart shows a meandering rally, with prices moving up incrementally.  However, we're seeing money move in and momentum increase.  However, like the QQQs, I wouldn't be surprised to see prices move back to the EMAs on a slight sell-off.

The weekly chart is more bullish.  Prices consolidated in a symmetrical triangle and have moved higher the last three weeks.  Money is moving in and momentum is increasing.

In addition, both the IEFs and TLTs have moved below short-term trend lines.  This is welcome news for the bulls, as it indicates there might be a chink in the safety trade.  It's still early, however.

Copper has broken through the short-term resistance of its downward sloping trend line and the 100 day EMA.  However, like the equity markets, I would expect a sell-off this week, largely to take some profits off the table.

As I've noted several times above, I would expect to see some selling over the next few weeks; we've had a decent rally through resistance, so that would be an appropriate response for the moment.  That would also let traders "catch their breath" in order to assess the economic background.