Saturday, April 20, 2013

The Big Weekend Review

The markets started their correction this week. You probably won't hear that from anyone in the financial media but that's essentially what has happened. How far it goes is still up for debate. I believe it will be the deepest plunge since the crash that occurred in the summer 2011, with striking similarities. The following charts will be weekly charts accept the first one. It is the intraday chart that will commence the next leg down. I believe it will start with a sizeable gap down in the futures Sunday night, before the NYSE opens for regular trading Monday morning.

One of the the things that you notice immediately after reviewing the weekly charts is how all the markets for U.S. equities are pulling back from resistance. These are formidable resistance points so the price reaction should display that as the move lower unfolds.

Bonds are acting bullish again after holding support and look destined to test their former highs. The first chart is an hourly chart of the 30 yr Treasury Bond Futures. The formation that has been created is bullish and odds are that it ends in a breakout to new highs. The shaded circle is where I expect bonds to open on Sunday night.
High Yield Bond ETF-HYG
Those money managers talking about a bond bubble are sorely mistaken. The next chart is a ratio of the 10yr Treasury yield and S&P 500. This chart speaks volumes. Stocks are going down and bonds are going higher for the foreseeable future.
Volatility Indices

While the VIX closed within it's overhead resistance this past week the VXN and RVX both broke out from from theirs. Now that the slope of the VIX is positive it appears it will be flying high very soon.


The final chart is a ratio of AAPL, GOOG, AMZN, GS, IBM and their relationship to the S&P 500 and 10yr Treasury yields. You can see how the bearish wedge appears ready to break.

ETF Roundup

Be ready to buckle-up next week. It should be filled with plenty of volatility and wild swings!

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