Why are bonds breaking higher today?  When you look at the relative performance of Bonds vs Equities it doesn't look like the "risk trade" is one that is getting a lot of action here.

Add to that how defensive sectors like consumer staples and health care have been doing lately (all the way back to the Feb 18th market peak), and something is starting to smell a little fishy.

Volatility

Much has been talked/written about the $VIX volatility guage today as this index dropped below the $15 level today.

It seems to me from what I have read is that $VIX is at very low levels not so much because of no fear in the market but because market players are busy buying longer-term options and selling shorter term options.  I'm not sure if that is the sole reason, and I'm not sure that will make a difference when we have the next market pull-in.

Interestingly, if you look at the daily chart of the $VIX, the last time we were at these levels was on option expiry date in February (the 18th).  That turned out to be the market top so far.

I took advantage of these low levels to add some VXX to my trading account when it crossed above the 20EMA on the 5min chart this afternoon ($27.49).  VXX is a tough vehicle to trade but it is a good insurance policy over the weekend.

Cheers

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One of the charts that is making a move today is KFT … looking at the longer time frame charts flies in the face of commodity inflation nailing food manufacturers/processors.  The only thing I can think of is that people are stocking up with Kraft Dinner because they are either broke or are awaiting the upcoming Armagedon/end of world scenario.  Last time I noticed KD was still $1.16 at Wal-Mart.  When it goes above $1.25 I will double my initial KFT stock position …

Cheers … Leaf_West………..Visit my blog

So far today the tape is pretty disappointing for the bulls considering that JP Morgan "manufactured" really good earnings.  When I look at the daily chart I think we are at a pivotal time right here at the $131 level … as you can see bulls really need to lift the price if the current wave count of a 5 wave bounce higher is going to pan out.

As you can see on this chart, the RSI(2) indicator is oversold and is indicating that a potential daily bottom could be near.  That is also hinted at by my favorite bottom fishing indicator, the McClellan Oscillator.

The Oscillator is not fully into the oversold zone as indicated by the yellow highlighted area but is right at the top of that range.  My favorite level is that -75 zone and it is currently at -52ish.

Other indicators are far from bullish so I am looking for any bounce to be short lived and will look to get short at that time.  Drawing a wave 5 target based on 5 = 1 draws a potential top at $135.72.

If you look at fibonacci time targets, the most logical spot for a top would be in 10 trading days which would put the date at April 28th as I believe there is 1 trading day holiday between now and the target date.

I would find it difficult to be short the market here …. any break lower should be marginal.  I'm starting to sound like Bernanke back in 2007/08 when he was talking about sub-prime …. I think that is my cue to finish the blog post.

Cheers

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Back by special request I have just finished a SPY Recap for Friday April 1st … Its a little different (and longer) since I tried to incorporate into it some discussion from the Live Chat Room to better illustrate what traders actually do on these trade set-ups.

I hope you enjoy it … it is posted as a PDF under the Recap tab of my blog so people can get a printable copy there.  I know that there will be some haters out there complaining about the length but I actually have had some e-mails from readers of the SOH that liked the Recaps … so this post is for you.  Others who are less interested in a recap of intraday trading in the SPY can probably just fast forward to the end and look at my higher time frame charts of the SPY.

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The US$ is often pointed to now by market pundits as a type of weather vane for their assessment as to the "risk-on" trade.  The thought is that the US Federal Reserve is debasing the US$ and all of the hedge funds in the world are piling on in a carry trade where they leverage up their Funds and bet on the US$ declining.

One of their favorite trades is to invest in any and all US$ priced commodities … gold, silver, oil, grains etc.  Trades never go on forever in straight lines however, and even if you believe in a thesis behind a "forever" declining US$ it pays to keep your eye on the short-term over-sold/over-bought nature of the US greenback.

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