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Saturday, January 29, 2011

Week-end Observations!!!

If you guessed Roy might be bearish, you could be right, to find out Click here!!!
We had the first cross-over of the 9 day MA's of the advancing and declining volume we have seen in the last two months, once declining volume over takes advancing volume selling begins and the markets turn bearish until the advancing volume can over take the declining volume. The lower indicator is advancing issues, minus declining issues, or Breath. There is a 5 day MA overlay to smooth the data and make it more useful. We can see that Breadth, or momentum topped way back in July, and has been waning to the downside since then. A falling trendline diverging from a rising market signals that the rally is getting weak and is prone to a trend change, or sell-off in this case.
In another chart that shows the waning momentum, the Summation Index has been printing lower highs for the last year, even though the NYSE has been making higher highs, in the longer-term, this divergence is also bearish.
TNX, which tracks the yield of the 10 year Treasure Bonds, has been flat-lining for the last six weeks as the indicators have been working off their over-bought conditions, this type of consolidation clears the way for a move in the original direction, in this case that would be up. A break above that upper green trendline could be very important, longer-term, meaning TNX is breaking out of a potential long-term triangle that would of had TNX making multi-year lows in the future.
Here is a snap-shot of the short, and long term treasuries, with all of them showing signs of consolidating, but with the spreads increasing, that is, yields are moving higher on the long-term bonds, while the yields are moving lower on the short-term bonds. Banks really love to see this, they can borrow money short-term, and lend out in the long-term for even higher profits.
The Daily chart of the SPX is starting to show signs that it is rolling over to a longer-term sell, both the RSI and STO have already done so, and the MACD is on a sell with the Histgram already negative, but is sitting right on top of a very important trendline of support that has held for the last eight months. The SPX is now at a critical stage, and if that trendline goes, this sell-off could escalate for awhile because of how over-bought the MACD is at this point. The heavy green lower channel line is the next level of support for the SPX, however the Russell and the Nasdaq 100 have already broke thru their respective line, so this line might not have much influence left. After yesterday's sell-off, the SPX is now up only 18.72 points, or 1.46% for the month of January, if we have follow-thru Monday, ALL of this months gains would be wiped clean.
The Percent of Stocks above their 50 day MA on the SPX took a big hit yesterday, and the price action is now clearly below the over-laid 20 day MA in blue. Not always a 100% perfect signal, but odds heavily favor a new trend underway.

2 comments:

  1. If this proves to be a meaningful inflection point, the fairy tale narrative constructed for popular consumption by the corporatocracy, its politicians and its media is going to get really interesting (provided the internet still works). If the CBO report is any indication, the obfuscation, dissembling and outright lying will only become more odious and extreme. Will it take 25+ years for the apple cart to finally tip over (see Egypt)? Don't bet on it.

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  2. Michael. The bond spread chart was real good. How about US Dollar & Silver Charts? Jordan

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