Anatomy of a Market Breakout

After the trading in a narrow range overnight and early in the morning, consumer confidence data came in much weaker than expected. If you click on the Market Delta chart above, you'll see within the bars how large size began hitting bids as the ES market moved below 923. At the same time, we saw a strengthening dollar and weakening gold and oil, both recent bearish themes for stocks, as 10-year yields pulled back from the day's highs.

The appearance of volume brought volatility, and the simultaneous move among asset classes reflected the fact that the morning numbers were, indeed, a game changer. It's the breakouts accompanied by significant directional volume and correlated movements among related asset classes that are the most trustworthy.

Comments

[Mad Hedge F...:]

What break out? As much as I like to open beer bottles with my teeth, do my own tattoos, and roll around in the snow naked and beat myself with birch branches, when it comes to pain in my investment portfolio, I am definitely a wimp. So I have to take notice when a “Golden Cross” occurs on one of the major indexes, as happened with the S&P 500 on June 23 when it hit 888. For the initiated, a “Golden Cross” occurs when the 50 day moving average moves up through the 200 day moving average. Historically, this means that the index will rise 7% in the next three months, 8% in the next six, and 19% over the coming year. The trouble is that if technical analysts were always right, they would only wear Jon Green or Anderson & Sheppard suits, drive Bentley Turbo RT’s, and certainly wouldn’t deign to talk to you. The harsh reality is that most shop at Men’s Warehouse, drive Hyundai’s, and work on salary for brokers. If they were paid based on performance, there would be no need for Jenny Craig or Weightwatchers. Not that they are to be ignored. They are right at least half the time. But their opinions are just one more thing to throw into the decision making soup.

Jun 30 01:19 PM

[whidbey:]

God man, get help!
The news cycle is the break out driver and it is becoming clear that the facts are overriding the happy talk. The basics are: the market is well ahead in its contemplation of another leg up, it is institutional money you are seeing. Technically it is reasonable that the next wave be up, but the continuous rain of bad news on jobs, reduced credit availability and the threats of the expensive, disruptive, Obama reforms override the capacity of the polity to absorb change, and the market falls apart again. We need some relief from the drum beat of the Administration. I admire your hopes, but they are not well supported.

Jun 30 02:14 PM