Thursday, February 2, 2012

Morning Market

Over the last few trading days, I've been watching the market very closely, looking for cracks in the rally.  While prices have been moving sideways for that time, there have been no strong downward moves, indicating we were in a period of consolidation.  This highlights the reason it's important to look at the market in multiple time frames; this wasn't as apparent on the daily time frame.

This is the chart that really highlighted the situation.  Notice how prices were finding support at around the 131 area.  The fact prices weren't moving through this level was, to me, very telling, as it indicated traders had a series of open buy orders around this level.  Yesterday, we see prices gap higher at the open.  However, we don't see them advance beyond the 133/134 level, telling us there is still resistance at this level. 

Again, the daily chart highlights the current situation in the detail we need.  The arrow is pointing to recent price action.  We see a cluster of bars around the 130/132 level, but no strong move above that level.  However, while we see strong volume indicators (A/D and CMF), we also see the MACD giving  a sell signal.  At minimum, this tells us to keep a watchful eye on the upside resistance areas/level (right around the 133.5 level).

The one negative with yesterday's price action is it more or less formed an upside down saucer formation with a sell-off near the end of trading on heavier volume.   

The long-end of the treasury curve is in a tight range with low volatility.  I don't see much chance for an upside break-out, given the lower yield that would occur.  So, keep you eyes open for the 116 price handle.

Industrial metals have consolidated recent gains around the 200 day EMA. The shorter EMAs and volume indicators are still bullish, but the MACD is headed to a sell-signal.