Thursday, April 29, 2010

Yesterday's Market

There were several important story lines yesterday. First, we saw a stabilization of the equity markets.

Both the SPYs and the QQQQs gapped a bit higher at the open, but then essentially moved sideways for the remainder of the day. This is a good development, especially in relation to the previous days trading where the markets dove lower on news from Europe. On the three daily charts, notice that prices found support at daily EMA levels:

The SPYs found upside resistance at the 20 day EMA.

The QQQQs found support at the 20 day EMA and

The IWMs found support at the 20 day EMA.

Overall, the markets are still overbought at current levels -- a concern I expressed on Monday

The Treasury market saw some selling:

Prices gapped lower at the open (a) and attempted to move through the 200 minute EMA twice (at points b and c), eventually breaking through at point d on higher volume.

On the daily chart of the TLTs, notice that prices are falling back to the downward sloping line of resistance (now support). That is an important development. Treasuries caught a strong safety bid at the beginning of the week as a reaction to the European situation. But the upward move ran against a big fundamental issue of increasing supply and a long-term head and shoulders pattern. In other words -- there are strong downward pressures in the market as well. Yesterday's move could indicate that the supply issue is still very strong in the market.

What I personally find very interesting right now is gold. First,

We have a break-out from a triangle consolidation pattern which fell back to the top line of the triangle only to rally again.

However, in the last two days at (a) we've seen two large bars printed on very high volume (b). In addition, the EMA picture (c) is bullish -- the shorter EMAs are above the longer EMAs, all the EMAs are moving higher and prices are above the EMAs. However, this is not the strongest upward move possible -- and certainly not the one I would expect considering the overall macro environment. I would expect a far stronger move.