Monday, October 3, 2011

Morning Market

Starting the week, here are the general observations about the four primary markets.

1.) Equities are in a very weak technical position.  The riskier averages are right at support and the less risky assets (SPYs) are approaching the 112 level -- again.

2.) Treasuries continue to benefit from the safety bid and operation twist.

3.) Commodities are very weak.  Oil is below its EMAs and 200 day EMA; copper is now in a bear market.

4.) The dollar has caught a safety bid, largely because it's the least dirty shirt in the hamper.

Last week, I noted several times that the riskier equity markets -- the Russell 2000 -- were in a technically weak position, shown in the chart above.  All the EMAs are moving lower and prices are using the EMAs as technical resistance.  Prices are also at important technical levels -- for the fourth time in the last few months.  None of these are bullish developments.

On the two year weekly chart, we see that prices are at important technical levels.  Also note the next important price point is right around 60 --  a little over 6% below the current price.

The QQQs - one step less risky than the IWMs but more risky than the SOYs, have broken a short uptrend and moved through recently established support a touch about 53.  Notice how quickly this average fell from technical strength -- above the 200 day EMA and in a fairly decent rally -- to one of weakness.  That's a very quick change.

The SPYs are very weak technically as well; all the EMAs are moving lower and are providing technical resistance instead of support.  Prices are also approaching the 112 area for the fourth time in the last few months -- a very poor sign indeed.

The equity markets are literally hanging on by their fingernails.  I would guess we'll see traders hang on until the employment report on Friday, but, if we get a bad report, expect a ton of technical damage to occur.