Thursday, March 8, 2012

TGIF?

The market is anxiously awaiting the monthly Employment report tomorrow morning at 8:30 EST.  A report that meets expectations (+210,000) will be positive for the market but won't cause a spike.  The concern is that if the report does not meet expectations it may be the catalyst for another sell off.

The fears over Greece seems, as of this writing, to be dissipating.  It appears that they will get enough private sector participation to avoid an ugly default but the question is whether credit default swaps will be triggered.  There are rumors coming out of the Euro Zone that the Greek government may have 95% private sector participation in the debt swap.  If this is the case credit default swaps will not be triggered.  We'll know more when the news is released at 1 AM EST tomorrow morning. 

Here's some charts as of the close of business today:

 (click for larger image)


Here's the S&P 500 and we broke a very steep uptrend line on Tuesday but with today's price action we are above that trend line again (red circle).


Here's a daily chart of the 30 Year Treasury Bond yield:


This chart holds the key to the direction of stocks!  The yield has been trapped in a consolidation triangle (green dashed lines) since October but the trend within the triangle has been up.  We're ready to break out of the triangle to the upside.  In the current environment we find ourselves, higher yields equate to stock market strength.

Now for one more chart:


This is the Materials Select Sector ETF going back late March 2007.  The index includes companies from the following industries: chemicals; metals & mining; paper & forest products; containers & packaging; and construction materials.  I've drawn a resistance line from the all time high of June 2008 to today's close.  The ETF has faltered after an attempted assault on the all time high in April 2011. 
While the market is clearly in an intermediate term uptrend, charts like this one are a longer term concern.  I'll be posting more of these from time to time in the coming weeks (there are more than a few).