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Monday Technical Review

  • Written by Syndicated Publisher 428 Comments428 Comments Comments
    January 31, 2012

    Even though the Dow was down a whopping 6 points today and the equity market showed a lot of resilience rebounding off session lows there is more to the story. Biggest news today is that of US Treasuries which continue breaking out to all time highs across the entire yield curve. Additionally the entire commodity complex was very weak.

    A few other notables mentions.The vix was up 5% when equities were only down slightly. HYG an excellent market time although down only .3% on the session looks very bearish on a daily chart. Mid Cap futures once again failed to close above key resistance as represented by the head and shoulder’s neckline. On that note I have a lot of charts to share with you today.

     

    Treasury

    The entire treasury curve looks very bullish right now and continues closing at all time highs. Today the 10 year closed at all time highs while the 30 year gained the most percentage wise. The 2 year remains above all time highs while the 5 year yield is now at an all time low.

    2 Year Futures


     

    5 Year Futures


     

    10 Year Futures


     

    30 Year Futures


    10 Year Yield VS SPX:

    Today the 10 year yield as measured by TNX broke the bear flag pattern further expanding the divergence between equity and treasury. Current SPX value based on prior treasury correlations is about 1,100.

     

    CRB:

    The CRB Commodity Index looks very weak the past few sessions closing down over 1.2% today and on the session lows. The DBC also looks similar down 1.1% on the session.

    Oil:

    Oil peaked on January 4, 2012 and has not supported the entire January move higher in equity prices. It has also failed to recapture the ascending wedge which failed on 1/19/12.

    Copper:

    Copper put in a big reversal today on higher volume closing just below the 200MA. Copper is currently in another bear flag within an overall downtrend since February 2011.

    Vix:

    The descending wedge that has formed for almost six months is close to resolving either way. This pattern tends to resolve in price breaking higher. It is truly amazing with all the risks facing the global economy right now that the vix is so low today.

     

    Bottom Line

    Today may have appeared to be a bullish day in equity but too many other asset classes continue to diverge. Today was the first real down day in weeks and I imagine a number of shorts used that weakness to cover and or go long.

    Something that has received very little mention is what happened in Greece over the weekend. Default became pretty much guaranteed when both Merkel’s office made it clear they felt Greece would default while Greece refused to conceded budgetary powers to the EU something that  Germany had demanded. But Germany has also made it clear future bailouts will require sovereign nations to relinquish budgetary powers.

    That is something that simply will not fly. That explains why sovereign CDS moved up today and is further proof that the “rumors” of a PSI agreement with Greek bondholders is just that, rumors. EU leaders are simply trying to buy time here to facilitate banks liquidating assets in a more friendly equity environment.

    Images: Flickr (licence attribution)

    About the Author

    Macro Story is designed as a one stop source for all of your macro related news and data.  From credit markets to economic data to geopolitics, you will find it all in a simple and organized fashion.  Content is presented in a format that allows you to read as little or as much as prefered.  Whether your goal is to do advanced research, a simple market overview or to become educated on macro subjects, the site has been designed with you in mind.
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