www.guerillastocktrading.com The S&P 500 took major technical damage on today’s chart as money continued to gush out of stocks and into the shelter of bonds. If you keep track of bonds then you know that massive buying in bonds has been going on for sometime now. The question that we all wondered was why were institutional investors still buying bonds in such large numbers. We bet we at the moment are aware of the answer by performing technical analysis on various markets and searching for connections linking them. This inter-market investigation of connections among a variety of charts has given us some interesting insight into why institutions have been purchasing bonds for the last 5 months. It has to do with lumber. No I am not a single fry short of a happy meal. When the price of lumber drops, bonds predictably go up. If you think about it, it makes wonderful sense. Lumber prices go down when demand falls off. In a recession large ticket items like home construction are hit hard since no one can afford to buy a house or even a car. This drop in demand for lumber makes the price of lumber drop as well. Seeing as home construction and the financing of homes, together with equity lines, make up such a huge percentage of our GDP, the drop in home construction implies unpleasant things for our economy and stock market and great things for bonds. What especially gets me furious at myself is that I didn’t see the spot on Fibonacci 50% retracement on the S&P 500 on Monday. I …
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@thobbit60 No shorting SPY until the neckline is closed on the Bearish Head and Shoulders top and we get at least 1 day of confirmation of a break below the neckline on good volume. I know how hard it is not to push the short trigger right now but we need a cool head here and patience.
yep… i saw it..
I agree with your bearish analysis. So why not short SPY?
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