Monday, February 4, 2013

Morning Market Analysis

Of the four major averages, only one (the QQQs) are not in the middle of a rally.  All have strong EMA positions and all are above their respective 200 day EMA.  There are a few warning signs to consider, however.  First, notice the large valume spike on the transports (bottom chart).  That could be interpreted as a buying frenzy.  In addition, all the MACDs are weakening.  The IWMs and IYTs (bottom two charts) have flashed sell signals while the SPYs (top chart) is weakening.

However, these negative  developments could just as likely be interpreted as the beginning of a consolidation rather than a sell off.

At the same time, we're finally seeing the treasury market begin to sell off.  The longer end (bottom two charts) are clearly in a downward trend with prices below the 200 day EMA and the shorter EMAs crossing below the 200 day EMA.  Also note that prices have moved through support established in early September.  The 7-10 year section of the market (second from top), is right at support with a weakening technical position. 

The next few weeks will be critical to seeing of the treasury market is finally going to meaningfully sell-off, thereby providing much needed funds for the equity markets.