On Sunday January 24th I wrote the following: “Back on January 6th I wrote about TLT for the 1st time. I made the observation that back in June the TLT broke 89 on the downside and snapped right back but the SPY went down for the rest of the month. It was about a 10% correction from top to bottom 96.11 to 87.

TLT broke 89 on January 8th the day before the SPY put in it’s high 115.13: I know we ticked at 115.14 on 1/14, but its close enough. A correction of similar magnitude now, would get us down around 104.20 which as it turns out roughly coincides with the 150 day MA on the SPY 104.56. I think that may be where we are headed. “The low tick on the SPY Friday was 104.58 and we have had 4 red bars on the SPY weekly chart. The question now is where we go from here.

Sovereign debt worries are being blamed for this most recent selloff and the strength in the dollar. I wrote on Thursday that it appeared we were headed for about 80.61 on the dollar index and Fridays high was 80.68 so the strong dollar weak equties trade still seems to be in tact.

When fear comes into the market and investors run away from risk they have traditionally gone to fixed income, specifically US treasuries. The TLT is an etf that tracks 20+ year Treasuries. At the height of the financial panic in late 08 and early 09 the TLT was trading over $120; it closed Friday at 91.99. This sell off has created a nice clear down trend line on the weekly chart going back to December 08. There is also one on the daily chart going back to10/02/09. Recent strength in the bonds has us bumping up against both down trend lines. I will be monitoring these levels to see if we can break through them on the upside and maybe have a selloff in equities or if we don’t have what it takes to get through and rollover and may be get a rally in stocks. The TLT is also trading between its 20 and 50 day MA’s and we will need to see if they act as support or resistance levels.

Stocks and etf’s too numerous to mention bounced off of the important ma’s (150 & 200 mostly) on very heavy volume. The heaviest volume I have seen on the upside in quite some time. My feeling is that we have put in at least a short term bottom. I am not sure what next week is going to bring but we will have to watch Friday’s lows on any test and be sure they hold.


Once again AAPL told the tale of the market. Early on in the morning he tested the lows from last week, held and bounced hard. As the day went on and the market was weak and looked like it might take a strong leg down: AAPL was trading strong. He never took out last week’s low and when the market rallied he closed the day on the highs.

I expect tomorrow to be a pretty quiet and choppy session as people try to sort out what happened on Friday and see if it is for real. I don't have any clean alert levels for tomorrow but I will be trying to pick up some longs as they bounce of f of the MA's and try some resistance shorts if the market can make its way back up Thursday’s highs around SPY 109. I know that is pretty vague but the charts are a mess right now.