Thursday, December 16, 2010

Yesterday's Market

Over the last five days, notice the SPYs are forming a rounding top. In addition, the rally up was grinding -- prices were moving higher, but there were very few strong bars or rallies; instead prices were inching up and then giving back a fair amount of ground. In contrast, the last two days we've seen a sell-off with strong moves lower, printing very strong bars.

Yesterday, prices rallied to the 68.2% Fibonacci level (a) before selling off to the 38.2% Fib level. Prices then moved sideways and hit the EMAs before moving lower (b). After selling off, prices moved into a grinding rally, but broke the trend and again moved lower (c). Prices then sold-off, rallied to (d) and sold off again.

Over the last few weeks, notice that Treasury prices have had several gaps lower (a) and some very strong bars lower (b) as well. This is a strong sell-0ff.

A closer look at the dollar shows the price/EMA situation is still mired in indecision. The EMAs are more or less moving sideways with prices trapped there.

Lumber was in an uptrend (A), which it broke at (B), when prices started to move lower. However, prices have started to rebound (D) and momentum is increasing (C). I use lumber as a proxy for the new home market.

Copper is still in a strong uptrend (A). Although prices dipped a few weeks ago (B), they are now back above the trend line (C). Also note the MACD is increasing (D)and the EMAs are in a very bullish orientation.