Tuesday Interest Rates & the US Dollar
All charts and comments intended for education and discussion purposes only. No investment recommendations are being offered. Comments below related to this post are encouraged. | MON - Sector Strength | TUE - Interest Rates | WED - Market Sentiment | THU - Commodities & Currencies | FRI - Market Breadth | SAT - Bullish Percents | About |
You have probably heard about the big drop in Asian share prices. So now it is really important to keep an eye on the health of the US equity market. One area of concern are the financials which is the largest sector and has a lot of influence over the direction of the market. In the chart of the ETF below you see what looks like a topping pattern of a struggling trend with a lot of unusual price volatility. A close below about 36.25 would confirm the weakness. The weak OBV is hinting at the underlying price weakness as well.
I don't like to invest against the trend and I like to see a strong broker/dealer group confirming the trend. Broker/dealers are a very important industry within the financials sector, and, unfortunately, right now this group looks weak.
One way to monitor whether the weakness overseas and in the financials is leading the market lower is to monitor the new highs/new lows of the NYSE and NASDAQ. At the moment these breadth figures continue to look healthy, but that could change rapidly so I would monitor these numbers everyday after the close.
The chart below of the yield curve is a reminder of a big question mark about the economy and therefore the market.
A couple people recently asked me if I had a sense of where long-term rates were headed. The answers is that I don't, so I will defer to the standard signals shown on the charts. The chart below shows a potential intermediate-term shift in 10-year prices to an uptrend with a break above the red, down resistance line. This implies the trend in long-rates is lower for now. With the selloff in Asia, I wonder if that implies a flight to safety and perhaps money flowing into US 10-year notes.
Looking at this chart of rates below, there can't be too much question about the current overall trend in rates. Every duration is below the moving average and moving lower. I'm going to assume the trend is lower while rates are below these moving averages.
