ANOTHER HEAD FAKE COMING?
It has occurred to me that there have been two fakeout trend changes since the April top, and I am wondering if a third fakeout is in progress. The first fakeout was the rally from a double bottom and a breakout above a declining tops line, which was accompanied by a PMO crossover buy signal. This proved to be a bull trap as the rally failed.
The second was the drop down through the neckline of a head and shoulders pattern, which was accompanied by a PMO crossover sell signal. This quickly turned into a bear trap when prices rallied back above the the support line.
Finally, we have another break above a declining tops line, a PMO crossover buy signal, and a PMO positive divergence. Also, price is above all three moving averages. However, on the negative side, a rising wedge has formed, which typically resolves downward. If that happens it would violate the rising trend line and inject some serious doubt into the picture.
The market action during the correction from the April top has been more than a little confusing. Prices passed up a great opportunity to go down, yet they are not showing inspiring upside action either. The wedge pattern resolving downward would not be the end of the world — it would be an event with short-term implications — however, taken in the context and proximity of the declining tops line support, it would not be a pleasant experience for bulls.
Bottom Line: Our timing model is bullish, and there are quite a few positive divergences on our medium-term indicators, so we think the rally will ultimately succeed, although perhaps not necessarily in the most elegant fashion. Final thought: Rising wedges can sometimes resolve upward.
However….the ema’s have yet to give us a bullish cross confirmation to price rise above.
We also have quite a divergence between bullish technicals and mostly bearish fundamentals….which one is leading (usually price and technicals) and which one is lagging is the real question…..wedge pattern says we should soon find out….
While the Stockmarket “Technicals” remain muddled
Treasury Bonds are ” SCREAMING ” SAFETY
2yr,5yr,10yr and 30yr Treasury Bonds had “HUGE MOVES” on Friday
An Update on the “confidence” ratios
The Stock/Bond ratio prefers Bonds “Safety”
The Bond/Bond Confidence ratio prefers Bonds “Safety”
Looking further into the components of the Bond/Bond Confidence ratio
There is some movement into the Junk Bond Market (Risk).But the price action in Treasury Bonds is so Strong (Safety) they have overwhelmed the price action ( Risk) into the Junk Market–
REMEMBER: Buying 2yr,5yr,7yr 10yr Treasury Bonds is NOT DONE by “Mom And Pop” investors.
Dave Rosenberg says he see’s the “End of The Bond Bull Market” But I would advise “DR” that the spread between 2.5Y and 4.00Y on the Long 30yr Bond is an Ocean(Pacific)wide and in the ” Great Depression” the Long 30yr Bond achieved 2.5 yield !!
“DR” has mentioned “Gold”–what he is seeing is the eventual “SPIKE UP” in the Treasury Bond market.
It is wise for “Mom and Pop” to look for any Definitive Price or Yield changes in the 5,10,30yr Bonds–
WITHOUT meaningfull improvement in the “Economy” (GDP,GDI) a Spike-Up in Interest rates would favor “Gold”
On the other Hand a “Spike-Up” in interest Rates based on a “definitive “improvement in GDP,GDI would favor Stocks
All the Best—AWF
Remember:
Your Investment and Trading decision are your own–
No warranty or guarantee given
It’s a trading range market, S&P 1000-1200. There isn’t anything to make it breakout on either side. Economy is slow, unemployment is high, but companies are profitable.Personally, I see more M&A activity down the road as the cash heavy companies increase market share and increase sales by buying up smaller competitors. The only way to grow will be by swallowing the small and weak.
I’ve only been following the market closely for a few years, but I’m continually amazed when watching as bears are eaten by what should be their prey. The problem is: they continually fall for the macroeconomic view (when the market is nothing more than a casino where traders bet on earnings from quarter to quarter). As for technicals, I see them only as overbought/oversold patterns that ride on top of “sentiment”, which, lately, amounts to a herd of wildebeasts scurrying back and forth — two months behind the news.
This market is not the same as March/April in terms of sentiment. Rallies are met with skepticism and bears are all over the press. I think a bear trap is more likely, not a bull trap.