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Sunday, December 19, 2010

Weekend Observations!!!


State Budgets: Day of Reckoning:
Steve Kroft reports on the precarious financial conditions many states are facing and what they're doing about it. Meredith Whitney is on "60 Minutes" tonight talking about the horrible state of muni finances. She's predicting over 50 defaults in the coming year. This should send some shock waves to the general population about how much in debt the States really are.
Muni's have been in a sharp sell-off for the last couple of months, tomorrow should be really interesting to see if the down channel holds.








The Elliott Wave trader has an updated video out this morning, E.T. was having problems with heavy construction noises outside that made a decent audio recording impossible, but rest assured his usual humanoid impersonation will return after the new year.





Time for a long look at TNX which tracks the 10 year Treasure bond, this chart goes back 50 years with a top that was put in back around 1982. Since then yields have been dropping in a very corrective manner with lots of over-lapping waves. There is a good chance that December 2008 marked the bottom with a larger under-throw of the long-term channel line.
On the Monthly scale that breakdown pushed the RSI to extremes, however, the RSI did NOT diverge before hand, that is put in a lower low before hand. There is also a good chance the TNX is in a long process of building a large triangle that dates back to mid-2007. On the Monthly scale all three indicators are on a buy after the latest bottom has occurred. This suggest that over the next year or so, TNX could work its way up towards the upper green trendline and make an attempt to break-out and then make a higher high above the $53 level. Over-all the monthly long-term chart is bullish.
The weekly chart is not nearly as bullish as the monthly and is showing signs that a shorter-term top is approaching with the indicators already reaching extreme over-bought conditions. Odds are good that it will have one more final push to tag resistance of the upper trendline before correcting back down to relieve those conditions. This is where it gets interesting because after the next sell-off occurs and the indicators are back in a neutral, or even over-sold territory the longer-term chart suggest that TNX will break out and start making higher highs.
The daily chart is not that much different then the weekly, also in over-bought conditions. It is highly possible that TNX is now entering into a 4th wave correction after the large impulsive move up that has lasted close to three months, that would relieve those over-bought conditions and clear the way for TNX to push up and tag that upper trendline before a larger correction occurs, but one that would not challenge the lows.

***The Weekly Trend Finder II has been updated, only one change this week, Gold has registered a sell signal!!!

3 comments:

  1. You are welcome, and Thank-you for the suggestion!!!

    ReplyDelete
  2. Thank you for your charts and observations.

    The Treasury market absolutely dwarfs the stock market and this action is getting very interesting. When the equities finally correct this should send the TNX lower as the flight to perceived safety(?) kicks in. Interest rates have peaked June through early August over the last few years. Will we get a repeat? Will equities also peak during this period in some sort of huge top a la April-June 1930?

    ReplyDelete