Tuesday, April 14, 2009

Treasury Tuesdays

Click for a larger image

The above chart is another reason why I don't think we're in a new bull market. Notice that prices are consolidating in a triangle consolidation pattern and have been since the end of last year. If the markets were really in a rally then I would expect a far sharper sell-off as money flowed from the bond market to the stock market. Part of the reason could be the Fed buying Treasuries thereby providing a floor on prices, but I think momentum out of the market would overcome that situation. In addition, notice the following:

-- The SMA picture is a mess; it's jumbled and unclear. Compare that to a standard bull market chart where prices are above all the SMAs and the shorter SMAs are above the longer SMAs.

-- Volume has been extremely weak over the last few days, indicating a lack of overall interest

Remember that in a consolidating market stochastics are a better indicator of possible future directions. Here we see a stochastic that says the possibilities of moving higher are, well, higher. Remember -- that is a technical conclusion that does not include fundamental calculations.