- WE'RE JUST RANDOM SPECKS OF DUST IN A TORNADO TO THE MARKETS .......
- CHARTISTS MUST PUT ALL BIAS ASIDE AND LET THE CHARTS DO THE TALKING OR WE'LL SEE ONLY WHAT WE WANT TO SEE
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Wednesday, 28 July 2010

Flight to Risk?

As I've been expecting for a few days now, thirty year treasuries have broken down through the strong rising support trendline that has supported the strong rally since the beginning of April:


More surprisingly, gold is threatening the lower trendline of the rising channel that has contained gold's rise for almost two years now. That trendline looks likely to break, but gold has hit an important support level, and has at least paused there for the moment:


I've been expecting the rising support trendline on long treasuries to break, and it is one of the last of the directional indicators that I watch to concede and turn green. We had a Dow Theory buy signal on Monday as well of course, and all I'm really still waiting for to complete the bullish picture is for the 13 & 34 EMAs on the SPX weekly to recross to change that bearish cross signal into a strong bullish cross signal. 

In the short term though, we may have seen an interim top on equities. ES broke down from the rising wedge of recent days yesterday and I've been watching to see if the rising wedge would turn out to be a diagonal slice of a previously unrevealed rising channel. The lower trendline of that theoretical rising channel was hit overnight and has held so far. If we see a break below 1108 ES today, then the rising wedge target is 1084.5 ES:


$NYMO has hit a overbought level that often precedes an equities retracement, which backs up the idea that SPX may have hit a short term peak here. The signals are mixed though, and there are some indications that we may need to go a little higher before putting in the next interim top:

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