S&P's Health Checkup
Pay attention to the wave counts and watch the daily chart for any close above 1,150.43.
- Levitation act (my opinion) continues for broader market
- NASDAQ and Russell 2000 have been star performers
- Commodities stuck in the mud
- Dollar index moving sideways
- Benchmark 10-year Treasury remains range-bound despite heavy auction week
Weekly jobless claims proved to be a non-event; some chatter about China's inflation and a global move toward higher interest rates. Equity markets spent nearly the entire day modestly lower, but a last-hour rally brought home gains of 0.4% for all three major indices. Even the recently strong NASDAQ and Russell 2000 appeared to be taking a breather until the late spurt. Oil and gold were flat; copper up 0.4%; natural gas down 2.5%. The DXY closed down slightly and the 10-year Treasury finished unchanged.
The US Treasury has been very active this week, auctioning $21 billion of new 10-year debt yesterday and $13 billion of 30-year bonds today. A bid-to-cover ratio of 2.89 and below-forecast yield on the auctioned 30-year debt suggests strong demand at current levels. If smart money is content with 4.68% yield, then what does that say about the prospects for the economy, stocks, and commodities? To go out on the long-end of the yield curve is to make a proclamation of your intermediate- to long-term economic expectations. Strong demand could portend a low inflation environment, a slow growth environment, or possibly something else altogether. It's important to figure out why big pools of money are allocated for a specific yield and why highly intelligent people are comfortable with placing large amounts of capital at risk for a seemingly small return.
Market Internals: NASDAQ
(Figures are rounded)
Relative Health of the S&P (top) versus NASDAQ (bottom)
Click to enlarge
- The S&P hasn't taken out its January high yet, but its RSI has -- a bearish reversal setup if no new price high is made soon.
- NYSE breadth peaked on Friday, while volume has continued to grow -- a sign of churning at or near the highs. No definitive conclusion to be drawn here, but evidence is mounting.
Click to enlarge
- Unlike the S&P, the NASDAQ does not have a bearish reversal setup. Instead, it has higher price peaks along with higher RSI peaks -- which is what you'd expect to see from a healthy market.
- The NASDAQ's breadth and volume trend over the last four sessions is similar to that of the S&P -- nothing alarming, just something that bears are watching.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Daily Recap Newsletter