Confused Market

by Paul Costa

Confused Market:  More dojis with long wicks, this seems to be the trend these days, with neither bull nor bear winning.  Although an edge has to be given to the bulls, as once again they were able to defend the 134.85 key support level mentioned on Monday.  In the afternoon the bears did break this level but the bulls climbed back above it holding it.

In technical terms nothing happened yesterday, we are simply right where we left off on Friday. My thesis for the week was bearish below 134.85 and bullish above 136.26.  None of these levels were broken.    The market did make lower highs and lower lows but support held so again that bearish sentiment can be taken with a grain of salt.  This market is confused at clearly giving no true edge.  It is almost best to sit and wait for something to happen.

More Confusion: If the market alone isn’t confusing, start to look at correlations in the market.  Here is the 10 year yield which broke below support and looks to be heading towards its lows for the year, when the market was hitting its lows.  The Ten year yield moving lower should represent some fear in the market as more people are moving back into bonds. Yet the market did not react to this move in the 10 year at all yesterday.   What are the bond markets trying to tell equity markets?  Is there still even more downside left in the market if so much?

Summing it up:  The market is providing no true edge with indicators point to the market moving in different directions. Potential targets for the market for both bears and bulls don’t lend to much reward for the risk here.   This is a great time to stay out and watch till there is an edge.

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