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Saturday, October 9, 2010

Week-end Observations!!!

Roy over at the Elliott Wave Practitioner has a nice clip for us this week-end, with a quick volume study of the ES-Minis and then a look at the NASDAQ, both of which are showing the market in a topping phase, check-out the short-clip by Clicking here!!! ________________________________________________________

Weekend Observations!!!

A comparison of the yields of treasuries is not a pretty picture, the FED is pushing rates to extreme lows as they are now the second largest holder of US debt, taking the second spot from Japan this week. If this was done by a private entity Congress would have hearings night and day, and the offenders would be getting free bed and breakfast for twenty-plus years. This is a debt-bomb getting ready to explode.
This is the yield on a five year T-bill going back to 1990 (this is as far back as Stock charts has data). I purposely have the chart in Log scale because the difference between 7% and 8%, is much smaller then the difference between 2% of 1%, percent wise.
This is just plain scary, and looks more like an out-right crash in progress. If the SPX had been following the 5 year yield as it has for the past ten years since 2000, the last four months would have seen the SPX breaking thru the lows of 666, and be in the low 500's by now. The Bulls better hope that the 5 year is not leading right now, as it has done occasionally in the past!!!!
With the yields dumping so hard it has had a pronounced effect of the value of the Dollar, the good news might be that the Dollar might be bottoming according to the indicators, the bad news, major crashes happen when the indicators are already in over-sold conditions that is when panic sets in.
The Summation Index has been acting very strangely for the last couple of weeks, it is in an uptrending consolidating pattern, instead of breaking out, and accelerating to the upside in an impulsive fashion that is more typical of a rally in the equities markets. This is one of the reasons the Trend Finder has been giving such weak bullish signals on the longer term, and why it has kept its neutral reading for an extended length of time.
The VIX made it down to the lower trend line yesterday. Normally a wedge, or triangle that is down-sloping will resolve with a break-out to the upside. I will wait for confirmation of a real break-out because the markets have been anything but normal lately.
The percent of stocks on the SPX that are above their 50 day MA has reached extreme readings, and is one of the main reasons that I believe we have been in a topping process for the last week. At these levels, going long, or if you are swing trading, holding longs are not worth the rewards, compared to the risk of a sudden sell-off. Ten S&P points over the last seven trading days is not much reward.
The long-term trendline of resistance coming off of the all-time highs is being challenged right now, low volume is favoring the bears here, and if there is a break-out on low volume watch for a very quick reversal. With the SPX having over 90% of its stocks above the 50 day MA, and with the Dollar and Bond markets in over-sold conditions we are at a very important point of inflection. Something big is on the horizon!!!!
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1 comment:

  1. SPX has exceeded the point where c=a. That also eliminates triangles and EDs. Surely the *risk* must be that SPX wants to try for c=1.618xa (or 3=1.618).