Wednesday, May 16, 2012

Morning Market Analysis

Let's start with the latest big moves in the currency markets.  The euro has broken through support while the dollar has moved through resistance.  This represents a clear flight to safety and exit of risk, as traders move out of the euro and seek safer assets -- hence the dollar.

What's important with this move is that we finally see a move out to the trading range each respective currency has been in for the last three months.  Also remember an old traders adage; the longer the base, the strong the move from the base.

The intermediate and long-term corporate bond markets have also caught a bid. This is interesting, telling us that traders aren't nearly as concerned about corporate credit quality as you would think.

At the beginning of the week, I noted that the SPYs and IWMs were both trading near the lower part of their respective trading ranges.  While the IMWs are still holding (upper cahrt), the SPYs have broken through support and have moved through another important Fib level.  The next logical price target is the 200 day EMA.

The above charts tell the continuing story of the risk off trade.