Here We Go Again.
Morning Market Commentary for Tuesday, August 10, 1999
Yesterday, the September S&P futures traded in the narrowest range in almost two weeks. At this point, with the S&P futures within striking distance of the June lows, it is most probable that 1290.50 will be tested shortly. After a very tight consolidation day like yesterday, the market is likely to be on the move.
Looking at the 45-minute chart of the S&P futures, we can see that after the initial ?panic? low of last Thursday, the market entered into a trading range. As buyers and sellers pause after the attempts to push the market, the price has formed a triangle as equilibrium is reached in the battle. Shortly, this will be resolved as one side will overcome the other.
We are going to take a quick look at Treasury bonds and interest rates. In this market, there has been a high inverse correlation of stocks to interest rates; that is, stocks are going down while interest rates are going up. This is the more traditional relationship between equities and rates. With a lack of buyers making the ?flight to quality? and a rise of inflationary expectations, the September Treasury Bond futures contract is also set to test the June lows, producing a period of commonality between the prices of bonds and prices of stocks. This set up has a high probability of causing a large move in the market as inflection points are reached at the same time in inter-related markets. In English, it?s all going down at the same time, causing a lot of pressure all around and it?s about to give. The market is set to perform a do or die test of the June low right here.
Charts specific to these comments have been posted to
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