Professor Elam

Tuesday April 5, 2010

I removed the usual indicators of RSI and MACD and MAs,
okay, what do you see? Quick now…

The answer, first of all, is a head and shoulders topping
pattern.  The deterioration is
clear with the right shoulder lower than the left. But more than that, the
second worry, the further one looks to the right, the more recent the trading,
the more gaps we see in the chart. In other words,  it has been harder and harder to match buyer and seller as
the auctions of bonds became more and more crowded with supply. This should
worry  anyone concerned with
interest rates, like all of us for example.

TLT a fund of 20 year bonds broke its support Monday. The
ten year is now at the shown by the green line. We suspect bonds are oversold
with a bounce due to April 18 as Barry suggests. But frankly the market
will  be pressed to hold up that
long.

We have suggested that the year is shaping up like 1987, that is more
and more clear. The very real possibility that we could drop from a projected
high on the S & P of 1300 to much much lower numbers looms as a very real
possibility. Now all the FEDS have to do is sell $82 B worth of debt this week,
against the backdrop of the highest rates in months