I am going out on a limb and say the Risk On trade is over. Despite a strong opening and some follow through in yesterday morning's trading, the equity markets closed lower, failing at the highs. This failure was confirmed by the setup in other markets and follows comments from Fed official that essentially put the kibosh on QE3 (see my post about it here).
On a intraday basis, the SPY traded up to just above the $143 level, above the April 2 high. The rally subsequently failed, as distribution hit the market. In my mind, this suggests the stock operators jammed the market to get clients out of positions. On daily basis, the SPY remains overbought on the stochastics.
This failure was confirmed in other markets.
The UUP (the PowerShares US Dollar bull index) traded down on the day. However, traders appear to have rejected the low, and the UUP could not break the June 29th swing point.
As for the dollar's mirror, the Euro, the FXE rejected the higher swing and closed at the lows of the day. another failure of the risk on trade.
As for treasury bonds....
The first chart above shows the IShares Barclays 7-10 year treasury fund (ticker IEF). The technicals in this fund are providing a weaker signal, but still show a retest and rejection of the recent downtrend. Additionally, the TBF or the ProShares 20-year short treasury fund restested the recent high and failed, selling off throughout the day. A move to the $28.5 level on the TBF is in the offing and we should get more information on the direction of bonds at this level.
Provided this technical setup and my fundamental views, I may take a more activity role on the short-side of the market in due time. However, we will need follow through to confirm the downside move.
Lastly and if you are a gold bug like myself, gold and gold stocks may give you another opportunity to buy at better prices. both the GLD and GDX could not handle the volume heading into resistance levels, with both closing near the lows of the day.
My gold stock timing model remains in a weaker by range and I would welcome lower gold and gold stock prices.
This failure was confirmed in other markets.
As for the dollar's mirror, the Euro, the FXE rejected the higher swing and closed at the lows of the day. another failure of the risk on trade.
As for treasury bonds....
The first chart above shows the IShares Barclays 7-10 year treasury fund (ticker IEF). The technicals in this fund are providing a weaker signal, but still show a retest and rejection of the recent downtrend. Additionally, the TBF or the ProShares 20-year short treasury fund restested the recent high and failed, selling off throughout the day. A move to the $28.5 level on the TBF is in the offing and we should get more information on the direction of bonds at this level.
Provided this technical setup and my fundamental views, I may take a more activity role on the short-side of the market in due time. However, we will need follow through to confirm the downside move.
Lastly and if you are a gold bug like myself, gold and gold stocks may give you another opportunity to buy at better prices. both the GLD and GDX could not handle the volume heading into resistance levels, with both closing near the lows of the day.
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