Around the markets in 6 charts or less |

Around the markets in 6 charts or less

Markets have been moving so fast and long standing relationships and correlations are being called into questions, but we’ll try to highlight a few of the areas we think are worth watching

CHART 1 SPX

Today intraday, the S&P broke 1185 support and fell directly to the top of our target area. The euro is driving the global markets on an absolute level, but the S&P continues to OP most global mkts. It’s now testing 50dma, while volume and $$ traded are inline from yesterday. The good news (so far) is that we held ABOVE panic opening lows. Rotations were clearly evident from the opening print – XLU XLV XLP were all positive out of the opening gate.

CHART 2 IWM

Meanwhile, the Russell 2000 intraday broke 72 support level and touched first target at 70. This “SHOULD” act as a support area. If we bounce towards the 72-73 range, it will provide a great shorting opportunity. We believe that if global markets bounce (and that’s a big IF), EU may be the receiver of investable funds and the EZU/IWM spread should close up.

CHART 3 TNX

The 10-year yield closed below the 3.6% support level. We believe that the UST is no longer a safe haven on an absolute basis. In a world of competitive devaluations, we expect the US government to issue debt at unprecedented levels, yet, interestingly enough, they announced that they’ll be cutting issuance. We believe this will be temporary. Should the euro bounce on new bailout talk, we expect UST will weaken. For the time being, safe haven bid remains.

CHART 4 DXY

The US dollar index is up 3.7% QTD and 8% YTD. Simultaneously, secondary FX starting to get thrown out as EU problems spread. Safe haven bid in USD remains – Target seems to be 85-87 area – its anyones guess. Should we get to those levels I would recommend buying AUD, CAD, and the other resource based FX, but only after the euro has a bounce toward 1.32-1.35 area.

CHART 5 Gold: S&P

Bounced off the lows and continues to move north: Gold is THE safe haven in a global. Resistance in spread 1.5% away. GLD above 116 – 120 would signal new highs with a 135 tgt.

CHART 6 SPX vs IWM

YTD, we see IWM strengthening vs SPX (big) – rotations within SPX are starting to favor lagging sectors. Still, we have time before the all clear signal. We believe any rally in the EUR which causes Europe to rally will most likely come at the expense of IWM.

This market has absolute moves that are making headlines, but it is the RELATIVE moves that are the keys to understanding the markets. Rotations between regions, rotations between laggards/leaders, and rotations between large and small continue to drive turbulent moves. The Keynesians running the show didn’t account for sovereign defaults, but the CDS markets continue to offer clues. Tomorrow, Spain and Britain may be in the crosshairs. Again, the questions are no longer whether one is short or long, but what one is short or long.

Last 5 posts by MacroMan

Thiel: Still heading toward deflationary endgame - August 4th, 2010
Quotable - May 5th, 2010
Quoteable - April 29th, 2010
Pimco Warns of Deflation Risk as Central Banks to Cool Stimulus - April 21st, 2010
Grant vs Greenspan - April 7th, 2010