Tuesday, September 07, 2010

Technical Picture - Wide Spread Weakness on European Banking Concerns

Concerns over the health of European Banks led to widespread selling on the open. Not surprisingly, banks (BKX) paced the ways down, giving back all of Thursday/Friday's gains. All but Gold was in the red by days end. Volume was light.

Banking concerns fueled money out of stocks and back into treasuries as depicted on the TLT chart below. Until the trendline is broken, I doubt we can have a meaningful rally in stocks.

Banking concerns stoked volatilty as the VIX gapped higher after testing four month lows on Friday.

And as expected the USD rallied versus the Euro.

Despite today's low volume retracement, we have to keep a close watch on the TLT, VIX, and USD to monitor the underlying strength/weakness/fear inherent in the markets.

Today's trading was light given the overbought conditions and general lack of setups.

Using the RSI price bars, I was able to catch a quick point in GS. Positive divergence to lower prices foreshadowed a trend reversal. GS forms a mini base and I used a buy stop order above the base to get long.

MON broke the downsloping trendline, but failed to hold. Now it should retrace into the support zone/5 day MA and we'll see if it can do something from there.

NTAP - two pivots into the $45.00 base. Needs to consolidate/retrace back to first level support. As you can see from the monthly timeframe below, key resistance dates back to 2000.

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