Submitted by Mark Hanna
Courtesy of MarketMontage. View original post here.
The TLT ETF is one of the most watched in the market, since it’s the easiest way for institutions to quickly move in and out of U.S. Treasury bond exposure. For many months during these rallies the fly in the ointment has been the U.S. dollar and Treasuries which constantly had a bid. The TLT had not been below its 50 day moving average since early April which is just about the time the equity markets began weakening materially. This instrument is now sitting on it for the second time in just over a week so it is at an important juncture.
As for the market as a whole you just have to tip your hat – I went back to review and 4 of the past 6 Fridays have seen monster moves up negating most/all of the moves down earlier in those weeks. The Friday after the Euro summit, last Friday after Draghi’s comments, this Friday, and one other Friday that I don’t recall the reason for the big move. Strangely each of the past 9 Mondays has seen markets close in the red.
However each time the market has been on a cusp like this of a breakout, the next few sessions have led to serious selloffs. We’ll see if this time around it is for real. This market is very similar to last summer/fall’s market in that the moves are violent and gaps are constant, but that market had a sideways to down bias whereas this one somehow has been going up with most of the gaps being to the upside instead of balanced between up and down (since June). To put into perspective 15 of the past 22 sessions (68%) have been selloffs in the S&P 500 – but the 7 up sessions (4 of them on Fridays) have been so ferocious, the market is actually up 20 S&P points over those 22 sessions. There is certainly little memory from day to day as each day’s headlines or rumors take everything with it.
Today the money is moving back into the pro cyclical areas which was another sign one would want for a sustained move. The euro is also strong today and that inverse trade has been the key one for markets.
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