Wednesday, January 11, 2012

What Will It Take For Me To Be Impressed With the Markets?

Since the beginning of the year, I've been complaining about the market rally.  While it technically looks like it's rallying, the rally is very weak.  Frankly, I don't think it's a rally that has any legs.  However, here are the conditions I need to see to be impressed.

1.) Print some strong bars: We've seen a lot of very weak candles on the daily chart.  What we really need to see is strong, intra-day price action.  In fact, we need to see several days of strong, intra-day price action -- say, 1%+ for 2-3 days on really good volume.  Having the trading end on the highs of the day on a volume spike would be great.  And having the intra-day rally move higher would be stellar.  Instead, what we've seen for the last week is a lot of sideways trading, which is not exciting me.

2.) Copper has to break out.  Right now, copper is trading in a downward range:

Copper has to make strong move higher, indicating that industrial demand is picking up again.  The good news from the commodity markets is that we're already seeing the grain markets rally.  But, we really need to see the industrial metals pop.

3.) We have to have a sell-off in the treasury markets.  So long as there is a safety bid in the market in the form of the treasury market, money will get sucked away from the equity market.  What we need to see is traders throw-in the towel on the safety trade and plow their sale proceeds into the equity markets.