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What to Watch for at Today's Close


Bond prices are heading lower as commodities further weaken.


Technical Relevance

What to watch for at today's close.

Key in on today's closing levels. Weekly and monthly closing prices are very significant in determining the macro trends. Please review my research carefully, as I've laid out my case for what to expect from the major financial asset classes.

15-Minute Chart Shows Recent Trends

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Market Internals (Figures are rounded)

Key Intermarket Charts

NASDAQ Monthly Chart

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  • The line chart above shows the NASDAQ going back over a decade.

  • The point I've been making consistently since December is that the NASDAQ and the other indices need to close the month out above the wave 1 low in order to invalidate my current wave count. As of yet, none of the three (NAZ, Dow, S&P) have managed to overtake its critical monthly resistance level.

  • Presently, the NASDAQ appears to be completing or has already completed the wave 4 corrective move and is now set to move sharply lower in a fifth primary wave.

  • Another bearish factor to acknowledge is that the NASDAQ is nowhere near the peaks at point B or point 2, yet the RSI has already moved up into overbought territory.

  • Furthermore, the RSI looks to have peaked out at horizontal line resistance near 74.14, consistent with multiple RSI peaks over the last year (see orange circles on chart).

  • The only potentially bullish point I can make for the NASDAQ based on the monthly chart is that it's moved above the 30-month moving average. This MA has served as support/resistance fairy reliably over time. However, I must note that the NASDAQ closed above the 30-month MA back in early 2008 (see point 2 on chart), but quickly gave that breakout back on its way to the horrible lows in late 2008 and early 2009.

NASDAQ Daily Chart

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  • The daily chart of the NASDAQ provides more detail about the bearish developments for the NASDAQ:

    • First, there's the obvious failure just below the 100% Fibonacci price extension line at 2,342.23.

    • Next, there's the downside break of the uptrend line in place since the March 2009 lows.

    • Additionally, the NASDAQ broke below and closed below the 80-day moving average, which has acted as a good support/resistance line over the recent past.

    • Finally, there's the obvious increase in NASDAQ volume on this downswing.

  • On the bullish side of things, there seems to be some horizontal line support just below the Thursday close at 2,176.32. If that level does not hold up as support, then the NASDAQ's next stop lower should be a test of the November 2009 low at 2,024.27. That's not the ultimate downside target, but it may be a place where there's a pause or a bounce.

Strategy: Use any bounce to lighten up on NASDAQ-related issues; nimble traders can use this and the next support levels as trading entries for very short-term trades. Anyone not willing to trade frequently should just step aside while this downside occurs -- which should take a while.

10-Year US Treasury Yield

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  • The yield on the 10-year US Treasury Note stabilized just above the 3.554% level and has actually begun to work higher now. A concurrent move lower in prices for stocks, commodities, and longer-dated Treasuries reveals an important change in attitude amongst investors and traders. As money rotates out of riskier assets, long-term Treasuries aren't getting a boost. This time, market participants are coming all the way in on the risk curve and seeking LIQUIDITY. Despite the plethora of positive earnings and economic reports, there appears to be some real doubt creeping into the market's psyche. Demand for liquidity is typically driven by fear and/or uncertainty.

  • Interpreting the chart, the current Elliott Wave count for the 10-year yield suggests that wave (5) higher has begun and it should take yields up to around 4.122%. At that point, wave (5), v and "a" should be completed and a corrective wave "b" should commence.

  • The downtrend that was in place from June of 2009 until December of 2009 is now acting as support for yields -- in conjunction with the top of wave (1) (Elliott Wave rule).

  • Again, it's both interesting and a bit counter-intuitive to see yields on Treasuries stable -- and even rising -- as the "safety trade" is clearly on in the other asset classes. This is a developing trend worth monitoring closely.

Strategy: Bond prices appear to be headed lower and yields higher on longer-dated Treasuries. The only play here is to be short of Treasuries via the futures markets or via TBT. Any close in yields below 3.554% should serve as an immediate stop loss on such positions.

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No positions in stocks mentioned.

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