Dollar and bonds could be the tell

8/20/12

Stocks bounced around on Friday but closed strongly, locking in another week of gains for the major indices. The Dow gained 25-points on the day.
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Administrative Note: Just a few more days and I'll be back on my regular schedule. My youngest is heading to college this week and we have some family in from out of town so I am on a light schedule, probably through Wednesday. The premium service reports will be posted everyday, but there may be some slight changes in the regular posting times. Sorry for any inconveniences this may cause.
Most of the major indices have been quite buoyant during this very uneventful August. There is an old saying that you should not short a dull market, is this is the kind of action they were talking about.

The S&P 500 continues to trade near the upper resistance line of the rising wedge. This is kind of a tough place to get bullish if you aren't already, because we could see a drop down to the rising support line on any hint of trouble in the economy or geopolitical world. These boring markets can go up for some time, but they could end with a bang.

Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk

The dollar is very close to breaking to the upside of resistance or breaking below support and I still suspect the market indices will break in the opposite direction of this chart, when it happens - and it shouldn't be long...

Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk

The small caps are nearing a breakout - or a double top pullback. It's a nice looking chart, but it may be too much to ask to break out right away.

Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk

Bonds have had a bit of a correction and the long-term uptrend is still intact, but it is getting tested.

Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk

Like the dollar, this could break in the opposite direction as the stock market

Thanks for reading! We'll see you back here tomorrow.

Tom Crowley


Posted daily at www.tsptalk.com/comments.html

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[Sensei]

I'm not bond expert, but it looks like there's a pretty big gap down around 109 on AGG from early April. Maybe stocks will rally until that gets filled?

 

[tsptalk]

yes, I see it. To break a long-term trend to fill a gap would be quite a move, I think. There's also a smaller one above near 112 that may be itching get filled.

 

[tsptalk]

Fake out or breakdown? I speculated earlier this week that stocks would break in the opposite direction of the dollar break, and today that is playing out, but is this a fake out? There's a double top on the Naz 100 weekly chart that concerns me in the short-term.