Tuesday, February 24, 2009

DoctorMad Update - Bull____ Rally…

Something’s telling me the General isn’t buying the Bull rally… and judging by the reaction of the futures to President Obama’s speech, his instincts are good.
Give the bulls some credit. They managed to avoid a crash and total collapse of Western finance for another day mounting an offensive off of the November lows at 741. Despite the strong rally, the bulls failed to bring serious ammo (volume) and they ended the days with the bears still in control of the yellow channel. I redeployed more troops into the close, however I am going to issue a full retreat on any further advance. A break of the wave 3 channel and the next likely stopping point is 800, and at the very least I'm going to want to reexamine the battlefield if that break happens. The key line for the bulls to hold remains 741, beneath that is Lucifer.

Bonds printed a reversal candle at the top of the primary channel on huge volume in the futures. This looks good for the start of the next wave down in bonds, Like stocks though I plan to bail if the primary channel is broken. It seems unlikely that both stocks and bonds break my way tomorrow, but the trends so far this year have been stocks down and bonds down. Last time stocks were at this level the TNX was yielding about 40 bps lower. Something to think about for the longterm future of US asset prices.

- DoctorMad