Wednesday, October 26, 2011

Morning Market

Yesterday, we say the equity markets retreat a bit.  The 5-minute charts shows prices retreating to the technically important level of 123, while the daily chart shows prices pulling back to just below the 200 day EMA.  This is a standard sell-off situation and should not be interpreted as a break in the upward trend yet.  Instead, we see traders taking some profits off the table as they wait to see how the upcoming news shakes out.

At the same time, we see Treasury prices rallying strongly, printing  a large bar, but on very weak volume.  Prices closed right above the 10 day EMA.  Again, this is not a trend reversal -- at least not yet, but instead a 1-day reaction to the equity sell-off.  The low volume indicates a lack of conviction on the part of traders to move into the treasury market in a big way.

After a late spring, early summer sell-off, cattle is nearing yearly highs again, largely because thin herds are lowering the number of cattle going to market.  This will lead to further upward pressure on food prices -- which are already moving higher at uncomfortable levels.

However, we may see a switch to pork, as prices there gapped lower severl times over the last two months.