Wednesday, June 9, 2010

Yesterday's Market

Note the SPYs may be forming a double bottom (a). Also note the volume on the first bottom (b) is higher than the volume on the second bottom (c).

The DIAs confirm the possibility of a double bottom, as do

The QQQQs. However,

The IWMs do not confirm (a). Ideally we'd like to see all the averages move in the same direction and make similar trading patterns. However, right now it appears there are three of the four major averages forming a double bottom.

a.) The EMA picture is bearish. All the EMAs are moving lower, the shorter are below the longer and prices are below all the EMAs -- including the 200.

b.) The A/D line has been remarkably stable, as has

c.) the CMF.

d.) There is obviously negative momentum right now.

I had been working on a theory that the long-end of the Treasury market had formed an island reversal at (a). This theory is no longer valid, as prices have moved higher after the reversal. However, see this article from yesterday arguing the bond market may be forming a bubble. While I don't think the bubble is extreme, I do think it raises interesting points. For example, considering the concern traders have regarding sovereign debt, should the US be allowed to have a 30 year yielding 4.11%?

Note the EMA picture is still bullish -- all the EMAs are moving higher and the shorter EMAs are above the longer EMAs.

But also note the technical picture is weak -- money is clearly flowing out (c and d) and momentum is weakening (e).

Although prices are still in a clear downtrend, industrial metals may have reversed course for a small counter-trend rally yesterday (a).