I thought for a change we would look at the most comprehensive volume numbers in the NYA. Notice last week the heavy volume with the up-down pumping action in price. This looks far more climactic than either the spx or spy charts we have looked at. Friday we had shortening of the thrust to a new high and fell to a lower low Tuesday. Since we have rallied to test the high and today we had diminished volume and a narrower range, although we closed at the highs. The jury is out but demand is not a t the level it was even 1 week ago.
Today we will begin with the bond index. Obviously it bottomed in the week that the stock market first topped in June and it topped when the stock market bottomed in July. It has not made a new low as the equities have soared to new highs. Instead it has made a higher low and within that consolidation has the making of a new uptrend. After bottoming 7/27, the market moved up with ease of movement in 4 bars with closes near the top. Two of those bars had wide ranges. More important the market surpassed the high of 7/21 making a higher high. On 8/7 it tested the 89.94 low and again rallied with ease. Yesterday we fell on heavy volume but closed well off the lows, showing some support. Today we had no follow through to the downside and closed near the highs, making our third higher low since 7/27. We now have the potential for an uptrend in the much despised bonds.
As described earlier during the first three trading days of August the dollar entered a spring position. That the three closes were almost equal shows the market was supported. We then moved up with ease of movement but failed to make a higher high like we did in the bonds. The large volume and small range on 8/10 shows heavy supply entered the market. 8/11 demand lessened at the top of a move and on the 12th prices fell off on heavy volume, supply was entering. Today the dollar gapped down with a narrow range and sharply lower volume. Supply is not following prices down and has dried up at higher low. We now have the potential for an uptrend in the dollar. Because much of the carry trade is centered in the dollar any rally here will trigger sell-offs in highly leveraged foreign speculations.
This blogger will soon be leaving for at least a week of Yeats and waves in an old castle on an island off of the emerald isle. His return is not yet scheduled. I wanted to remind readers that the very uncertainty that is the center of this blog right now is the very reason why I named it after The Lord of The Rings. One of the points of Tolkien's trilogy is that there are certain powers that men should not have and are not wise enough to control. Among those is the power to create money at the stroke of a key. These charts are so uncertain because they depend on the will of a few men who in their hubris have taken control of multiple markets. Will they now continue to bull stocks at the expense of the dollar and the interest rate markets, further enriching some but endangering others or will they pursue another course?
No man should have so much power.
