Wednesday, September 8, 2010

Yesterday's Market

I want to start with the bond market today, because the bond market has been a huge beneficiary of an increased concern on the part of investors. Back in May when the Greek crisis started, investors flocked to bonds. Since then, they've been in a strong rally. However, that may be starting to crack.

For the first time in five months. IEF prices have broken below a trend line (a). In addition,

Prices have fallen below the 20 day EMA. Also note the 10 day EMA is approaching the 20 day EMA (but, it's not there yet).

The problem comes from the longer end of the curve -- the TLTs. And the real question is what is the real trend line.

The above trend line makes sense, as there are three major touches (pointed out with arrows). But,

Another trend is also possible. However, there is a really long time between touches and there is a huge area that is not touching the line at all (which I have circled).

So -- which line is the real trend line? Well, this is where the correct answer is both and neither. Simply put, there are reasons to argue both are valid trend lines.

Prices on the SPYs have been above the 200 day EMA for three days now (a). However, they have done so on weak volume (b).

Over the last three trading sessions, we really have a very tight trading range.

Gold continues its upward climb with trend line (B) still intact and a very positive EMA picture (C). However, once again its in a very stubborn resistance area (A) and it is losing a touch of momentum (D). Gold needs to convincingly move through the (A) area and then retest lows to make a real move higher at this point.

Oil is still stuck between areas A and b Right now, prices are in a tight range in the lower 70s (C).