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Market Updates

Major averages holding trend

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This morning's marginally higher open for stocks was quickly reversed to the downside, but the major market averages have been able to trade up from their worst levels of the session. Many of the rebounds look to be coming from shorter-term upward trends, but with Treasury YIELD pegged at their lows for the session, I think the upward trends are currently suspect.

S&P Depository Receipts (AMEX:SPY) - 60-minute interval

The S&P Depository Receipts (AMEX:SYP) $88.80 -0.19%, which tend to mimic the S&P 500 Index ($SPX.X) held upward trend on the 60- minute chart this morning. This upward trend is a bear's first hurdle he/she needs to see broken to achieve first bearish target of $83.95-$84 as described in this morning's 09:00 Update.

Dow Diamonds (AMEX:DIA) - 60-minute interval

Similar upward trend on the Dow Diamonds Trust (AMEX:DIA) $84.45 -0.58% has been tested this morning and has held. Note the similar positioning of the 200 and 50-pd MA's. Traders will set some downside alerts just below this morning's lows in each respective index to alert to building weakness and breaks of bullish trend. Alerts may have already been set a previously identifies horizontal resistance levels.

With Treasuries seeing buying across all maturities, a bearish equity trader begins to think that there isn't a lot of "bullish cash" that can flow toward equities at this point. Still, we've seen some "asset allocation" adjustments in recent weeks, so a bear simply wants to see YIELD remain near current levels. It would be a sharp rebound higher in Treasury YIELDS, combined with upside breaks in the horizontal resistance or downward trends that would give a bear early alert that renewed strength is found.

For now, still rather "range bound" and traders are looking for some type of breaking of support or resistance.

Trader will note in the QQQ, that this more heavily "tech- weighted" security broke its upward trend on a 60-minute chart yesterday. This perhaps give some credence to our observations over the past year, that larger tech remains suspect under a still slowly improving economic backdrop, but VERY suspect under a deteriorating economic backdrop.

Jeff Bailey
Senior Market Technician
Option Investor

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