Monday, March 19, 2012

Morning Market Analysis, Rally On Edition

The big story last week was the sell-off in the treasury market across all maturities.  While all their respective MACDs were signaling a clear lack of overall momentum, we finally see the indexes sell-off, with the IEFs and TLT showing good volume.  All three are also approaching respective support levels (IEF: 119 IEF: 100 TLT 109).  All respective prices have also fallen below the 10 and 20 week EMAs, another bearish development.  One of my concerns with the equity rally was the bond market taking money away.  That is no longer the case.

The IWMs weekly chart shows that prices have risen to near levels reached earlier in the year.  There has not been a dent in any of the technical indicators either, indicating that further highs are in reach.

The IWM monthly chart is even more bullish.  Prices are right in key resistance areas first reached in mid-2007 and again in 2011.  All the underlying technicals are also bullish -- the MACD is rising, the A/D and CMF are rising as are the EMAs.  This chart tells us that unless we see significant technical damage on the daily or weekly charts, the overall trend is higher.

The SPYs weekly chart is also very bullish.  After breaking through resistance at the 135 level, prices slowed their upward gain.  However, last week, we see prices printing an impressive candle with strong underlying techncials.

The QQQs have the exact same underlying technicals as the SPYs, making this chart bullish as well.

The central news last week  was the Fed's statement, which many interpreted as bullish.  This provided the fuel to send the equity markets higher.  However, the real news was the treasury market sell-off.  Treasuries were acting as a safe haven, draining liquidity from the equity markets.  With Treasuries selling off, expect the equity markets to move higher.