Monday, May 7, 2012

Morning Market Analysis

To review my general opinion of the market.

It's my belief that the market is at best consolidating gains right now, and at worst, starting a correction.  The primary reason for this situation is the overall economic slowdown in the US, Asia and Brazil along with the recession underway in the UK and UE.  This is also confirmed by the treasury market, which is consolidating at a market high.

Let's start with the three primary equity indexes:

The QQQs have been the strongest index during the rally.  However, after topping out in the 68.75 area, prices are now dropping.  They are currently at technical support in the 64.70 area, but a move through these levels would lead to support at the next Fibonacci fan.  Also note the sharp drop in the MACD and CMF. 

In contrast, we have the IWMs and SPYs, both of which are still trading in a range of 78-84.5 and 136-142.4, respectively.  Like the QQQs, we also see a weakening MACD and CMF position.

Over the last week and month, the stock market has dropped , while bonds have been net gainers.

Also note that all the sector groups were negative last week, with the utility, consumer staples and health care being the three sectors that lost the least.

In contrast, we see the treasury market is trading in a range at the high end of prices, with the following ranges in play:

SHY: 84.10-84.5
IEI: 119.5-122.5
IEF: 101-106
TLT: 110-121

In effect,  we're back to a conservative market situation, with the safety bid lifting treasuries and traders moving out of equities.