From Japanese bonds to US corporate debt, and from biotechs to
oil and gold, here's a roundup of several key charts and what
they're indicating about today's markets.
- WTI oil is pulling back about $1. There's a distinct inverse
head-and-shoulders pattern on the daily chart, but for the right
shoulder not to break down, the price must hold $91.80. If that
fails it could get nasty down to $85.89. Upside resistance is
$97.47. Note that $91.80 and $97.47 are the key levels on
traditional charts as well as reflecting TDST Level Up and Level
Down on DeMark daily charts.
- Gold seems to want to retest the April lows; momentum
divergences and DeMark counts should be good tells on whether the
test will be successful or another sharp leg down is in the
offing. In any case, no great risk/reward setup until the $1,350
area in my humble opinion.
- Italian and Spanish bond yields continue to rise while their
CDSs remain flat to lower; I tweeted a few days back when this
divergence first showed up, that this needs to be watched
closely; if rising rates start being divorced from rising credit
risk, the market could be signaling: i) confidence in an economic
recovery; ii) government walking away from fiscal discipline;
iii) bond vigilantes tired of money printing; or iv) a mix of all
of the above. What all these scenarios bring into play is more
pressure on central banks to stop their insane behavior,
something that equity markets - at least initially - may not
- The swings in the yen and Japanese government bonds have been
"flash crash"-like in speed and size; it would be "awkward" to
say the least if the BOJ had to put a bid under the yen/bonds to
calm things down, considering that it has set out to structurally
weaken the yen. Messing with currencies is like messing with
nature: It makes you feel like a genius until you lose control of
your Frankenstein monster. Once that happens, in a world of
fiat-/confidence-based currencies, confidence can evaporate very
quickly, and it becomes very difficult (or impossible) to put the
monster back in the cage.
- Wheelbarrows of corporate bonds continue to come to market
daily. Just on Monday and Tuesday the tally is more than $26
billion across a slew of issuers; deals are regularly upsized and
prices go off lower than initial indications. After dropping
below 5%, average yields on junk paper are back in 520bps area,
although about half of the increase is attributable to increase
in Treasury yields. After a multi-week slide, CDSs of large US
financials are flattening out near multi-month lows. The 2-year
swaps appear to have settled in the 14bps range.
- Once again, yesterday's close on the
iShares Nasdaq Biotech Fund
) was outside the upper Bollinger band; I've been harping on how
overextended the IBB has gotten for the last $20, but the longer
it grows to the sky the more those $20 will likely be made up
even faster on the way down.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.