Monday, May 14, 2012

Morning Market Analysis

The above 30 minute charts -- which show the each market's price action since May 1 -- highlight the changing fortunes.  The SPYs have fallen from the 141.5 level to the 135.5 level - a drop of about 4%.  However, last week prices consolidated in the 135-136.5 price area.  In contrast, the IEFs rose from 105.3 to 106.5 (an increase of about 1.1%), spending last week consolidating gains in the 105-106.5 area.  Finally, we have the dollar, which has clearly caught a safety bid, rising from 21.8 to 22.4 for an increase of about 2.75%.

The above three charts show how traders have greatly changed their perception of the economic background.  The safety trade is obviously back in vogue.

The daily chart of the IWMs and SPYs are still in a trading range, with the IWMs finding support at the 78-78.5 area and the SPYs at the 135-135.5 area.  These areas held over the weekend, which is technically good.  However, given the deteriorating condition of the emerging markets, I wouldn't expect these levels to hold.