Submitted by Mark Hanna
Courtesy of MarketMontage. View original post here.
I mentioned Monday that the market was very tied to the Euro at this time, and this has held true – the currency continued to sell off through mid week and the market sold off even more sharply. Today the currency is bouncing smartly, and so are the major indexes. Algos having fun. We still observe a little descending channel that the Euro is in, but it is at the very top of it now, so a break above this trendline would set the path for a nice breakout. And as goes the currency…
Meanwhile the iShares Barclays 20+ Year Treasury Bond (TLT) reversed almost exactly where it needed to, holding intact a downtrend line forming since late July. This is now a second lower high and obviously the relationship between bonds and stocks has held quite firm as an inverse one for most of the past few years, so bond weakness is a bonus. For the market to hold in, seeing this reversal pattern in bonds continue would be a positive.
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