Tuesday, February 7, 2012

The "wall of worry"

The market continues to grind higher, ignoring all the gloom and doom surrounding Greece, the possibility of a Euro zone recession and all the talk about how our economy is so weak.

What we're witnessing is exactly the kind of action we want to see in a bull market; a slow, deliberate march to the upside.  It's almost boring.  Here's the Russell 2000 Small Cap Index:

 I've highlighted the steady climb higher with blue arrows and notice the "Golden Cross" forming.  This is where the 50 Day Moving Average crosses over the 200 Day Moving Average.  Much is made of this signal as a predictive indicator but it is actually a lagging indicator.  However, it does serve to show the strength of this market.  Also note MACD in the panel above.  It doesn't get any stronger than this!

I've said for awhile that the "fix is in" and we are going higher.  Looks like I'm right for now.  If only Treasuries and commodities would confirm.  We're close to a confirmation in Treasuries but it's still "no cigar".  Here's a daily chart of the 10 Year Treasury Note yield:

I've highlighted in purple the false breakout we had in January and the black circle is where we are at the close today.  We need to see meaningful movement to the upsuide in interest rates to confirm the strength we're seeing in equities. 

And commodities are still going nowhere.  Here's Copper which is representative of the price action in all industrial commodities:

We'll see what tomorrow brings ...