Since Dec 31st 2013, the upper trend-line touching the swing highs was acting as a resistance. The resistance broke on June 5th and S&P 500 traveled up. Today it started to come back to the resistance line. The touching of upper-resistance line coincided with the bounce off for bonds from swing lows. Bond bounce started on June 4th but S&P 50 did not coöperate so bonds again fell. Today, 30-Year US Treasury Bonds closed above yesterday’s close. Chances of S&P falling to the support level created by May 13th and April 4th high of 1902 have increased.
Since beginning of this year, bonds have been rising within an up-sloping channel. For the last few days, bonds are courting the lower limit of the channel and are ripe for a move up. Though there is a strong resistance line looming above – highs July 2013 and October 2013.
Dollar Index Knocking On Upper Limit
Dollar Index is at the upper limit of a horizontal channel. A break above will bring in play the resistance level formed by the highs of November 2013 and January 2014 and the measured target of 82.20.
The Dollar index generally rises when the US economy and market do well as foreigners buy US Dollar to invest in the USA. However, since 2008 financial crisis, US Dollar has been acting as a safe-haven, which means that if there is an upheaval in the economy or the market then the investors flock to it and when every thing seems okay then they get out of US Dollar and get into riskier assets like stocks, commodities and foreign assets. A break above the current upper-resistance line will be slightly bearish for riskier assets.
Next Few Days
Days around the Triple Witching day in June have generally been bearish for the market. In fact, there has not been a single positive week after June triple-witching week since 1998. Today’s price action seems to be setting up the market for coming down days. We will write more about it soon along with trade ideas. In the mean-time it would be good to revisit your trades and decide what your strategy will be if the market stumbles.
