Today was not so much a down day so much as it was an inside day consolidating our recent gains, under the highs (117.51) and above the day 20 day MA (114.61). For the most part it was a choppy day on below average volume.


The real action however was in bonds, currencies and the volatility index. There were huge in moves in the dollar index, bonds and volatility index which could have implications on equities in the days to come.

Fitch downgraded Portugal’s credit rating last night, that coupled with a poorly received bond auction conspired to give us a big selloff in the US Treasury bond market. TLT closed the day at 89.27 down almost 2% on massive volume.

Readers of this blog may remember my observations about the 89 level in TLT. In June of 2009 TLT broke the 89 level snapped right back and was quickly followed by a roughly 10% selloff in the SPY.

Again on January 11th of this year TLT broke 89 snapped right back and again was quickly followed by an almost 10% selloff in the SPY.

On February 18th however TLT broke 89 and we did not get the hard selloff in the market. Clearly this is not a perfect indicator and in fact maybe a coincidence, but given the ferocity in the selloff in the bonds today, the rally in the dollar and the levels that the market is at, this is clearly worth watching.

I may be making more of this move in the bond market than is necessary, financials (XLF, JPM, and BAC) and tech (XLK, AAPL, and HPQ) look good. But some of the commodities especially the precious metals (GLD, SLV & GDX) look vulnerable. It seems as if macro traders are anticipating some Fed tightening before inflation starts.

With that said I don’t really have any good short candidates for tomorrow. In fact I have mostly break out longs, support/reversal buys and 1 short. Remember the rules on buying pullbacks and use reasonable stops.

anf 45 long

intu 35 long

mtl 27.5 long

avp 33 long

jcg 46 long

vale 32 long

omg 35.5 long

wfsl 20.5 long

rig 80 short

atw 33.15 reversal/support buy on 200 day MA

cnq 69 reversal/support buy on 50 day MA

slb 61.12 reversal/support buy on 200 day MA

gld 105.88 reversal/support buy on 150 day MA