The Bond Bubble

Another good article from CNBC regarding fixed income.  It highlights the problem of having low interest rates for an extended period of time and the fact that so many people have chased yield as a means of return over the last couple of years.  It also highlights how difficult it can be to call a top in any bull market, especially when the rates are being manipulated by a government agency.

S&P 500 close 12/14

Not a good day for the markets. We finished near the lows of the day at 1413. We are near a couple of important technical levels now. First we are very near the convergence zone of 1400-1410. If we move back just a little we should retest 1400. Second we are now touching the weekly trend line, albeit still on the upside of it. Third, the sideways moves reinforces the weekly head and shoulders pattern that may be trying to form. On a more positive note, we are now back in the "value zone" of two moving averages that help track trends. If we can bounce from here even just a little it may give us the momentum to move more positively. However, pushing south of them and things do not look so good. Technical indicators have the short term weakening and long term although still improving, they are slowing down.

S&P 500 close 12/13

So we failed to breakout above 1430 and pushed lower to close at 1419. Tomorrow becomes important because of the weekly close level. If we close sideways we move back into the weekly head and shoulders pattern. However, if we move up toward 1430 the likelihood of the pattern becomes considerably less. Although one day/week is not going to make or break any large move. Nonetheless, the clock is ticking on the market. For those who want to see how the market fights over an important technical level, look at the first hour of trading today. If you can look at a minute chart and you will see the bulls and bears trying to fight for control.

S&P 500 close 12/12

So to use a baseball analogy today was a foul ball. Not quite a strikeout, but pretty close and just barely alive. After starting the day up above 1430 and getting help from the Fed to move much higher, we still retreated to 1428 at close. Within striking distance of 1430, but not enough to feel comfortable. We have had a number of up days in a row, so it may be a little bit of a break. But then again, it is cause for some concern. With two days left this trading week, we need to see some upside determination to move forward.

Waiting to buy (or sell)

So I wanted to quickly touch on a subject that I thought was completely ludicrous when I first started looking at technical analysis as a possible investment strategy: the breakout.
Stocks move in trends and trading ranges with corresponding support and resistance levels. On most occasions, attempts to break an existing level fails, whether it is support or resistance. These are characterized as false breakouts. A false breakout is when the price moves through the level only to see the move fade late in the day.
False breakouts happen more often than not. That is why a close beyond the level is important. It is also why markets/stocks trade in trading ranges a good bit of the time. These levels have numerous shares traded at these prices over time and moving past them is a pretty big feat. The longer an investment or index stays at a certain level the more difficult it is to get past it. Once it does occur the liklihood that the investment/index pushes back through the level is unlikely.
As you can imagine a good number of people tend to buy before the resistance level is taken out. As a result, most people end up buying high and selling low.

S&P 500 close 12/11

Pretty good day for the bulls today. Rallied at the start and then moved above 1430 for most of the day. We reversed late in the day moved down to 1424 but finished at 1428. So feeling pretty good about this market but want to see a close above 1430 to go all green. I will post tomorrow, in addition to my normal close post, regardless of the day's move to explain why waiting for a higher price to buy is sometimes a good move.

S&P 500 close 12/10

Another tight range by the S&P today.  We could not make it above 1420 for long and traded down slightly in the middle of the day.  Technicals are the same incrementally improving long term momentum and a flattening of the short term indicators.  We need to break up beyond 1425 to get out of this possible head and shoulders pattern.  Sideways is not a good sign at these levels.