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Technical Update: Friday Market Review.

  • Written by Syndicated Publisher No Comments Comments
    October 1, 2011

    And that’s a wrap on Q3. Who said there was volatility? For the week the SPX was up a whopping 2 handles.  Joking (or failed attempt) aside that was a nasty close. The commodity slide continues, the bid in bonds continues and across the board more technical damage was done to equities.

    The big question on my mind is how this quarter’s redemption requests will affect markets over the coming weeks. Today was the deadline for investors wishing to withdraw money from their hedge fund and the reports show in many cases the numbers will be large. Did funds begin unloading ahead of the crowd causing today’s selloff? Will funds hold off on selling in hopes of higher prices into next week? I’m sure these questions will be asked in many fund managers heads over the coming days.

    That’s a big unknown for sure. Considering the historically high leverage (currently at September 2008 levels) a “selling begets selling” event could easily happen. Something to keep in mind whether you are looking to go short, go long or unload an existing position. As for the market here are some key charts to look at.

    Copper

    Copper is just getting decimated. It broke the bear flag then the multi-month trend and now looks poised to fail at what may have been a double bottom being formed this week. The bleed over into equities is coming or has already arrived as leveraged commodity funds are forced to sell anything to meet margin calls. WTI crude today was down another 4% at 79.04 last check.

    Treasuries

    Below is chart of the 10 year yield and downtrending channel is has been in since August. With targets on the 10 year in the 1.50% range an investment could still return a capital gain so those chasing yield as they reduce equity exposure may be tempted. The 30 year really fell hard today now at 2.92% down 8 basis points on the day and down from 3.51% on September 1.

    SPX

    The bear flag is still in play and yet again lower lows and lower highs have been printed. Very bearish chart right here. With the rally early in the week any oversold conditions have been worked off so this market technically has a lot of potential room to the downside.

    VIX

    The bull flag is still in play. The key test if and when it happens is 48.00. Above that level will show fear last seen during the 2001 and 2008 recessions.

    Images: Flickr (licence attribution)

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