Monday, October 24, 2011

Morning Market

Equities: The SPYs and DIAs have broken out.  The QQQs are in a downward sloping pennant pattern and the IWMs are on the verge.

Bonds: The sell-off continues, as it appears the risk on trade is back

Dollar: the dollar continues its sell-off.  Remember, the dollar has become a risk trade proxy; when people seek more risk, they sell the dollar and when they seek less risk, they buy.

The DIAs and SPYs have broken through the 200 day EMA.  The DIAs had a decent volume surge, while the SPYs had a bit.  They have also moved above important areas of resistance.  With both averages the 10 and 20 day EMA are moving higher, with the 10 having moved through the 50 and the 20 on the verge.  Prices had a nice period of consolidation right below the 200 day EMA to allow traders to "catch their breath."

The QQQs are a bit further along.  Prices have been above the 200 day EMA for a little over a week, and all the EMAs have already crossed over.  Prices have formed a downward sloping pennant pattern, which is a standard consolidation pattern in a rally.  All the EMAs are also moving higher.

One of my central criteria for determining if this rally was for real was the technical resistance of the 200 EMA.   Now three averages are above this important bull/bear market line, which is very important.

The 7-10 year treasury ETF is still using the 50 day EMA as a "center of gravity."  However, note the shorter EMAs are both moving lower with the 10 day EMA about to cross below the 200.

However, the TLTs have moved below their consolidation range and are using the 50 day EMA as technical support. 

So, we have rising equity markets and falling treasury markets.  In addition,

The dollar is selling off.  Prices -- which consolidated below the 200 day EMA -- have now continued to more lower.  The 10 and 20 day EMA have both crossed below the 200 day EMA, and the 50 day EMA never made it above it.  In addition, we've seen a pick-up in volume.

As mentioned above, the markets are clearly in a "risk on" trade position right now.  The most important technical development we could see right now is a strong move lower in the Treasury market on strong volume; this would indicate there is a move out of the safe assets.