Wednesday, January 4, 2012

Morning Market -- Still Not Happy With the Rally

Oil is right at important resistance.  Notice the jump in volume over the last two days and the positive crsosover from the MACD.

On the weekly chart we see that there isn't must resistance between a break-out and the high from last spring, which means the economy could be facing more oil related problems.

Gold has rallied above resistance and hit the 200 day EMA.  Also note the MACD has given a buy signal.  However, the CMF is negative.  On the fundamental side, the bulls will point to Europe as the primary driver upside.  The big sell-off could have been overdone.

This is the big issue with the treasury market: prices are right near long-term support from a trend line started last spring.  Over the last few months, we've seen both momentum and the volume related indicators decrease.  However, on the fundamental side, the treasury market is still catching a safety bid.  In order to be comfortable with the markets current rally, this trend line needs to be broken.

The long-end of the treasury curve is forming an upward sloping triangle consolidation pattern -- which has occurred at the end of a 6 month rally.  Right now, prices are at important support levels; a convincing move through these levels would add more fuel to the equity market's rally.

The 60 minute chart really shows my concern with the latest rally.  We see a nice gap higher on Tuesday -- and then nothing.  Prices are in fact drifting lower -- hardly the sign of strength.  Also notice that momentum has died as well.  Prices have not collapsed -- but they are just staying there.

The IWMs shows the basic problem in a more pronounced manner.  Prices actually gapped lower yesterday and then drifted higher.  Again -- notice the lack of real, meaningful follow-through on the rally.