Monday, November 22, 2010
There are two important trend lines in the short term market: (a) -- which prices have clearly broken and (b), which prices have also broken.
Over the last approximately one week, notice that prices have printed mostly down days (a) with several gaps lower. While prices have broken the downtrend (b), they have done so on fairly weak volume (c).
On Friday, prices dropped at the open (a), found support at previous lows (b) but rallied from those lows and moved higher for the rest of the day (c). Also notice that prices printed some strong gains at the end of trading on increasing volume.
However, the daily chart still looks like prices are going to consolidate for the next bit of time.
The Treasury market has also had a big sell-off over the last 10 days. Notice the three strong bars lower and two gaps lower. This is indicative of investors dumping shares.
Also note that prices have broken support line (a).
The dollar -- which caught a safety bid from the EU situation -- broke its uptrend on Thursday. With the news that Ireland will accept a bailout, this trend should continue.