Stock Market Viewpoint

Stock Market Viewpoint
Reading the Tea Leaves...

Tuesday, September 6, 2011

Bonds to Stocks Switch 9/6/11

Stock Market Technical Analysis

Click on above images to enlarge

This morning at 11am I tweeted the minor "sell bonds buy stocks" switch signal and is shown in the upper chart cluster on today's four black trading bars with the red line on the bonds chart and green line on the stocks chart.  The bonds traded down and the stocks traded up throughout the day but the momentum was slow because of a situation in the VIX and SPY charts. 

I attached a lower chart cluster for the benefit of the people that actively trade the market in addition to their 401k holdings.  The SPY and VIX charts in are in this six.  Two things that kept the market climbing slowly was the situation in the VIX chart where today's big gap open got the VIX slightly above its black line uphill channel and the VIX stayed near that line thru the middle part of the day even though the NASDAQ was climbing and the bonds were falling.  Finally in the last hour, the VIX dropped back down into the black line uphill channel.  The other hindrance on the market was the SPY chart because traders could easily see that if the SPY climbed throughout the day from its buy signal this morning it would still have to deal with its downhill brown line channel that it got right up to at the closing bell today.  Tomorrow the SPY will have to convincingly break out of the downhill brown channel again to confirm its ability to run up in the blue channel over the next several days.   This could make tomorrow's trading volatile or mixed.  The NASDAQ, VIX, and bond charts all say the new move up in the stocks has started well.  However, when the SPY hits the upper brown channel line tomorrow morning the bears will be shorting in size to try to break the SPY back into its downhill brown channel. 

The GLD (Gold ETF - GLD) in the bottom left corner is reflecting traders uneasiness about the fight coming up in the SPY at the upper brown line tomorrow and it actually traded sideways to slightly upwards into the afternoon even though the VIX was falling.  I marked the exit for the GLD with a red dot this morning but the gold traders are a feversih bunch and if the SPY has any trouble at the brown line then I'm expecting GLD to jump some even if the VIX isn't.

All in all, a nice switch was made from bonds to stocks today and the VIX is playing ball by staying down in the uphill black channel instead of shooting on up to the top of the blue line channel.  Since the SPY has been a bit of a drag on everything lately, if it breaks clear of that upper brown channel line tomorrow stocks should have a nice day number two from this mornings switch to stocks signal.  I included an AAPL chart tonight showing that it had its buy signal this morning also. 

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