Monday, August 6, 2012

Morning Market Analysis; Safety Trade Going Away?

Let's start with the Treasury curve, as there are some very important developments here.  Notice that the IEFs and TLTs have both broken support.  Neither have moved convincingly lower, but the break is clearly there.  Both prices are right above the 50 day EMA and we see a declining MACD pattern that has been occurring for over two months.  The IEIs are right at support as well.  The treasury market has been taking money out of the equity markets as the safety bid has been very strong.  The above charts indicates that might be ending now.


Also note the QQQs (top chart) broke out of their trading range on Friday, moving above the 65.5 level.  The SPYs almost made it, but fell back at the end of trading.  The charts above are not out of the woods yet; ideally we'd like to have a follow through day on decent volume. 

The dollar has been trading in a range for the last tow months, moving between 22.4 and 23.1.  While the dollar was the previous benefactor of the safety trade in the market, that honor is now bestowed on the Australian dollar and, to a lesser degree, the Canadian dollar.