Friday, December 3, 2010
Yesterday, the markets opened with a strong rally (a) that eventually changed into a sideways market that consolidated in to rectangles (b and c). As with Wednesday's trading, notice that the MACD spiked in the AM with the rally but then moved lower for the rest of the day. This is a fairly standard development for this indicator on early spike days.
On the daily chart, notice that prices are continuing to move beyond the resistance line (a).
On the daily chart of the IWMs (the Russell 2000), notice that prices have moved through resistance (a) with a strong bar. Also notice the EMA position (a) -- the shorter EMAs are about the longer EMAs, all the EMAs are moving higher and prices are above the EMAs. This is important because the IWMs represent risk capital -- money that is more oriented towards capital gain rather than gain and dividends. As such, this move confirms that upward move of the SPYs.
Also note the transports are printing a chart similar to the IWMs, adding further confirmation to the upward move we're seeing in the equity markets.
The dollar has clearly broken its uptrend (a) and is now moving lower in a downward sloping channel (b). Notice that within the channel there are several strong downward moves (c), indicating selling pressure is fairly strong right now.
On the dollar's daily chart, notice that prices hit resistance at the 200 day EMA (a) but are now moving lower. This lower move coincides with a possible easing of stresses in the EU region, adding fundamental downward pressure on the dollar.