Current Price Action is Clearly Bearish

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Meanwhile, over in the Empire of Debt, signs of dilapidation in the Treasury market. Treasuries tumbled after the government’s $9 billion auction of 30-year bonds at the lowest yields ever chased away investors, reports Sandra Hernandez at Bloomberg. You reap what you sow, Chairman Bernanke. Prepare to reap the whirlwind.

But its more like the whirlwind that results when a crowd of people exits the room all at once. Whoosh! Would you lend money to the U.S. government for 30 years, receiving about 4.49% in interest? No? Well then, you speak for most institutional investors as well, who were not
interested in buying the low-yielding bonds of a big-spending government.

The Dow, in a fit of confidence, managed to buck the bearish trend for the dollar and finish slightly higher. Not that it matters much. Equities are in a grinding trading range thats trending downward. And it could go down faster quite soon, according our technician Gabriel Andre.

Gabriel says, The S&P 500 closed up of 0.79% at 1,336.91 yesterday in New York. But its down nearly five per cent this week. The weak action means its been unable to sustain the rebound begun after the low of 1,270 posted on January 23.

This failure validates the view that the rebound was purely technical and the consequence of a short-term oversold situation.

What is the chart telling us to expect now?

The rebound stopped just below the 1,400 level, considered as the intermediary next resistance (line A). The main resistance (line B), which was previously the long-term bullish trend support, will be the crucial chartist test on the upside. A break above this line of resistance would trigger a bullish signal.

However the current price action is clearly bearish after the recent fail to clear 1,400. The intermediary support goes through the low of 1,270 (line C). But a break of this support on the downside would easily lead the index towards the low of June 2006, around the 1,225 area.

We received very little reader mail this week. This must mean you are busy preparing to bid at a property auction, or immersed in deep thought over the ideas of the German Historicists. Either way, have a great weekend. Well be back at it on Monday.

Until then

Dan Denning
The Daily Reckoning Australia

Dan Denning
Dan Denning examines the geopolitical and economic events that can affect your investments domestically. He raises the questions you need to answer, in order to survive financially in these turbulent times.
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Comments

  1. “What does this chart tell us?”

    That drawing triangles stopped being useful after 3rd-grade algebra?

    Drop this pseudo-science and give some real analysis please.

    Reply
  2. The lines are not Hoodoo Voodoo, the author is just trying to demonstrate/illustrate the momentum of the markets.

    Reply
  3. Any predictable pattern in stock prices is exploitable and thus self-destructing.

    Reply

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