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June 10, 2009

Fade 2:00

I picked the wrong week not to have a vacation. The last five closing prices for the S&P 500 boast a total range of 3.32 points. It seems one could make a living these days by fading two o'clock since equities seem to begin streaming back toward flat at that hour. It's downright monotonous, though the action fits right into our Bart Simpson pattern.

s&p 500 index

nasdaq 100 chart

The breakout sported by the NDX has the markings of a false move. Today's hangman candle could mark a top and also provides a conveniently close basis for a stop.

banking index

The banks are looking mighty weak here and a break of this trend line will likely coincide with a downturn in the general market.

The primary reason equities have been able to hang tough, in my opinion, is the continued strength in energy. As you know, I believe this rally is running on fumes.

oil chart

And my next comment will probably shorten a few fingernails by way of dental truncation:

gold price

I'm actually contemplating a gold short to counter my other long positions. Such a move would be quite temporary. We either get the down day or we don't. I won't be hanging around waiting for it to happen, and I won't be hanging around after it happens. I have no target for a decline, but if gold makes it back to the April low, I would begin to get more anxious about intermediate-term prospects.

Of course, our discourse leads back to the dollar, to which I have ascribed our finale tonight. Yesterday, I mentioned that the dollar index would have to slip beneath 74.50 for me to contemplate a bottom test. Well, the DX touched 79.44, but let's not slice hairs. The chart certainly does not appear to have formed a bottom test.

dollar index

The Treasury auction did not seem to go too well today, as bonds continued to slide despite already-poor expectations. The 30-year is approaching a potential support level, however, so it will be interesting to see how price behaves here.

30-year treasury prices

If bonds break further, will the Fed admit they've lost control and start acting responsibly or will they panic and make sure the dollar takes out its recent low. "Hmmmm... that's a tough one," your author commented facetiously.

Good night.


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