Wednesday, March 30, 2011

US Dollar Index (DX) - A possible Falling Wedge Bullish signal in the making

USDX bounced off the important Support around 75.50 and is trading currently inside a possible Falling Wedge that could produce a Bullish signal if broken on the upside. An important level to watch for this breakout is 76.50.

30-Year UST Bond targets 117.50

Everybody awaits hints of rising rates and a bond market selloff ahead of the end of QE2.
Technicall the 30-Year UST Bond is below the pivotal 120 mark and indicators point to a further decline which is in line with the fundamental expectations of rising yields.

Stochastics entered into Oversold territory, however BBands and charts points to immediate targets around 117.50-118 before a bounce could be expected.

Small Caps continue to Outperform the S&P 500

The Russell 2000 index continues to outperform the S&P as the ratio chart shows. It usually means that large caps are fairly valued and money flows into Small Caps in search of additional alpha.

The Teflon Market - S&P and the Sector Performance

The Teflon Market as they call it on CNBC shrugged off all the bad news from Middle East and Japan and is once again in Bull mode. SPX broke above the 55-Day MA targeting the 1335/4o recent highs. Technicals remain Bullish and trend looks constructive at this stage.

Small Caps represented by Russell 2000 are outperforming the S&P and looking for new highs.

Basic Materials remains in the best performing sectors list with Precious Metals leading the rally as Silver is on a strong Bull run with immediate targets above $40.

Energy Sector along with Crude Oil making new highs underpinned the strong performance of the S&P in the midst of the recent tensions. Oil & Gas companies seem to benefit from the rising Oil prices and the fears from the Nuclear power as Uranium stocks were hit extremely hard after the Japan Earthquake.

Financials are struggling and remain below the 55-Day MA. Housing sector problems and big number of mortgages still under water seem to be a drag on the balance sheets with slow credit growth doesn't help also.

Industrials are lagging the Materials and Energy but still perform in the top tier as economic recovery goes on.

Technology is having problems below the 55-Day MA for the moment as companies still withhold from spending.

Interesting enough the Consumer sector is a raging bull here but looking a bit tired as the trend is looking a bit flat even though we see a nice pull back after the Japan earthquake hit. The QE2 loose money policy should be benefiting the consumer while it is a bit confusing as the housing sector is struggling and mortgage payments are a drag on consumption for a large part of the lower income population until the unemployment falls to levels below 6-7%.

Utilities as a traditionally defensive sector are not in vogue and actually flat for the last 6 months.

Health Care is actually in a pretty healthy position. We should monitor the political decisions for further guidance in this sector.

Tuesday, March 8, 2011

30-Year UST Bond is trading at crucial Support

Momentum indicates a slight pickup which is positive for the Bond price action as it is trading at crucial Support level.
A breakdown lower would signal higher long term rates, which however is important to watch as the FED is continuing with its QE2 program through the POMOs.
It might be a significant indication to note that the recent political tensions in the Middle East didn't inspire any notable 'flight to safety' buying and my take would be the market, spearheaded by the 'Bond Vigilantes' is continuing its short positioning in the bond market since the rise in rates is inevitable and the time till this event is ticking closer.

Monday, March 7, 2011


Crude Oil is the major market theme today with Energy sector companies the leaders in the S&P 500 and continuing to outperform YTD.

Crude is breaking above the most recent high today on the back of the weakening USD and the trend is accelerating as the indicators are signalling.

Friday, March 4, 2011

Global Macro Trends persist unnerved by the political tensions

Weekly S&P 500 chart has a pending Golden Cross (50 x 200 Week MA upside crossing).
FED's QE2 is fueling cash in the equities market. The index is a bit overstretched above the 50-Week MA and a possible test of the Golden Cross levels - approximately 10% correction to 1175 - 1200.

Dr. Copper is alive and kicking as global growth is recovering boosted by the Central Banks' persistence in keeping the loose money policy.

Crude Oil is sustaining a break above the psychological $100 mark. Next target lies at around $112 with technical indicators supporting the bullish case for Oil.

Gold is testing the all time High around $1440 and might correct till $1360-80 to test the long term trend line Support.

Silver is a bit overstretched above the 50-Week MA and testing the Trendline Resistance at current levels ~ 34.50. At this level I'd watch for a possible fake break and correction to 26-24 levels where the Long term Support should hold the present Trend.

US Dollar Index (DX) is trading right at the Long term Support trend line at 76.40-50.
FED's policy isn't signalling any hints of tightening and the debt buying program is weighting on the USD value. Below 76 level the trend should accelerate.

The 30-Year UST Bond is trading right at the 200-Week MA which held the last 5 tests on the downside. QE2 program is still in action so I'd be cautious on breaks below as I see limited downside until June '11 after which it will important to see the market reaction as the bond king Bill Gross asked who will buy the US debt after FED stops the POMOs.

The 2Year - 10Year Bond Spread is currently Bullishly steepened which suggests more economic growth and spell bullish sign for the equities.

The longer end of the yield curve - the 10Year-30Year Bond Spread has also violently reversed and steepened in the end of 2010 which supports the bullish case for the equity markets so far.

Thursday, March 3, 2011

US Dollar Index (DX) is nearing a crucial Support level at 76.50

Chart by

The 2-year EZ-US bond spread is favoring the EURUSD appreciation and a decisive close above 1.39 would most likely bring acceleration to the present trend.

US Dollar Index (DX) is trading near crucial long term support trendline which comes around 76.50. A break below opens the avalanche scenario of major slide in the USD while the FED is reluctant to hike rates and the ECB is starting to relay hawking signs.

The make-or-break level should be 74 where the present weakness would most likely accelerate to the 2008 lows.