Bearish Charts in Equities About to Be Joined by Bearish Developments in Bonds and Currencies

By Tim Thielen Oct 23, 2012 4:05 pm

We are just on the verge of additional breakdowns in some of the important "risk tell" charts in the bond and currency markets.

MINYANVILLE ORIGINAL Man, do things get negative in a hurry – both in terms of price and in market sentiment. That’s the thing that has prevented declines from really taking hold in recent days, weeks, months – the run to bearishness that occurs. With a market basically dominated by institutional managers and pre-programmed machines, extreme bearish sentiment levels can quickly put a halt to a market decline, which in the old days would have had much more room to fall.

With that dynamic acknowledged, I will note that there certainly are technical breakdowns that have occurred and more that may be on the verge of occurring today (barring a major change in the action heading into the close today). The chart of the S&P e-Mini futures is shown below. Notice that the minis have closed out their 240-minute bar below the “correction support” at 1,420.75. Pay attention to the S&P cash support level given later in the report as we head into the close to see if the breakdown in the Nasdaq is confirmed. Also, keep in mind that there’s Apple (NASDAQ:AAPL) news today, a Fed announcement tomorrow, and Apple earnings on Thursday. Things can certainly change – especially with that line-up of potential catalysts. For my part, however, rather than focusing on the news itself, I will be monitoring all of the critical technical levels in all of the asset classes (bonds, stocks, commodities, and currencies).

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Before I get into my usual look at bonds and currencies this week, I want to quickly touch on some observations I have on market internals.

INTERNALS

Volume: Bearish / neutral. Volume definitely picked up on Friday during the sell-off. It was noticeably higher than the 10-day moving average and clearly trumped any recent spikes. Today, however, it’s not alarmingly high (yet).

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