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Wednesday, December 10, 2008

The "After Bond Market Close" Rally

The TNX (yield on the 10 year treasury) gapped up this morning, indicating that the stock market may be in for a rally. However, it started selling off, and ended up filling in the gap. The SPX soon followed (the light blue line is the approxiamte path of the SPX). Since the bond market closes one hour before the stock market, there was no TNX to direct the market, so it was party time. The market rallied into the close, although off the high of the day.

The 50dma is decending and closing in on the 918 area, which is putting up some stiff resistance. 885 looks like an important support level, and that was today's low. Notice that since breaking through RSI 50, we haven't come back down below it. Traders seem reluctant to buy unless we can break through 918 and the 50dma, as today's low volume attests. Without a catalyst of some sort, we may be doing some testing here for the next few days.

Despite the frustrating see-sawing going on today, there were some encouraging signs I saw when looking at the charts. Since hitting bottom last month, the Nasdaq has been outperforming the SPX (the blue arrow marks the reversal point).

467 is support on the Russell 2000, 491 resistance. One or the other is going to fall soon. Notice the blue arrow here, the Russell began outperforming the SPX immediately after the market hit it's November bottom.

XAU, the gold and silver index, hit bottom in October, but the relative strength line reversed a couple of days before. This has actually broken through the 50dma, and has been one of the strongest indexes for the last month. Gold has held up fairly well despite the recent strength in the dollar.

I screwed up my morning updat this morning, which I can only attribute to lateness of the coffee taking affect. GEF did not report this morning, it reported after hours today, and is trading down less than 1% after hours. I listed MBB as a breakout, but clearstation has out of date information, and despite knowing better, I did not double check it.

I will be back shortly with the new highs update. As usual on Wednesday, I won't have a late update.

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