Wednesday, April 18, 2007

General Overview

This is a chart of the S&P 500. After a mixed day it is good to review where the market has come from. It is also helpful to attempt to take the point of view opposite your bias. If you are extremely bullish right now, try to think like a trader that is looking to short this market and look for ideas that might give you caution. Lately this rally has been on declining volume, but this underlying factor could continue as the market goes higher and higher. As long as the market stays above 1461.57 it is going to be risky to be short. Another no volume short squeeze would be a painful experience and could bring new money into the market. In this chart this 1461 level is marked, as well as the channel we are in(white lines) and divergences with the advance/decline moving average(blue and green).

This is the corresponding chart for the NASDAQ Composite.

The next two charts are of the dollar index and a comparison of the 30yr interest rate versus the 5yr interest rate. The rate of the US Dollar receives some attention from a couple of financial news outlets, but with earning's season it won't hold any headlines too long. It is something to keep an eye on, and to look at from the standpoint of both the domestic benefit and its drawbacks. There is a major incentive to keep this sell off very orderly and not let it get too much velocity. We will see what happens.

Have short term rates reached their peak?

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