Monday, November 12, 2012

Morning Market Analysis

Last week, we saw the continued sell-off in the equities market.  After the election, the market turned its attention to a combination of the deteriorating situation in Europe and the fiscal cliff discussion in the US.  There is also concern about a somewhat lackluster earnings season.  As the equities market sold-off, we see money flow into the bond market in a classic flight to safety move.  

The 30 minute SPY chart (top chart) shows the 140.5 support level which prices broke on Wednesday.  The daily chart (bottom chart) shows that prices are still targeting the 200 day EMA in this sell-off.  Also note the continuing negative technical environment -- a declining MACD, negative CMF and declining EMAs.  Finally, notice the increased volume on the sell-off indicating the intensity of the decline is increasing.

Notice that two parts of the treasury curve have now broken through resistance and are moving higher.  All the remains is for the IEIs (3-7 year; top chart) to follow suit.  All three charts now have buy signals from the MACDs  and rising price strength.