Friday, July 30, 2010

Yesterday's Market

Prices on the long-end of the curve are still below their long-term trend line (a). Notice that preceding that move was a decrease in momentum (b), a drop in the A/D line (c) and the CMF turning negative (d).

The 7-10 year part of the curve has the same technical alignment with its indicators. Prices are handing on by a thread.

The reason a drop in the Treasury market is important is it will free up money to flow into riskier assets, hopefully providing a boost to the stock markets.

Yesterday was quite a wild ride. Prices gapped higher at the open (a), but then moved lower. They formed a bear market pennant pattern that ran into resistance at the EMAs. Prices then moved lower and formed a double bottom in the late AM (c). Prices then moved higher, rising through the EMAs before forming a bull market pennant pattern (d). Prices then rose agin, but fell into the close on rising volume (e).

Yesterday I noted that ideally, prices should test the 200 day EMA after their run-up. That is happening. Now the question is whether or not this level holds.

Oil continues to hit resistance at the $80/bbl area. Also note the EMAs are in a very tight configuration (b), signaling confusion on the part of traders.

The rally in wheat -- caused by a drought/high heat situation in Russia -- continues. The uptrend is firmly in place (a). Prices have taken the time to consolidate some gains along the way (b). Also note the EMAs are moving higher, the shorter EMAs are above the longer EMAs and prices are above all the EMAs (c).

Gold continues to move lower as inflation expectations diminish.