Wednesday Technical Update: Perfectly Balanced

Everything is perfectly balanced right now. Resistance is all being tested across pretty much every asset class. There is really no need to add any commentary today but rather show what I mean by a lot of charts.

Something is going to give and that day is literally here. You can’t get any closer to resolution than where equity and credit markets stand right now. Both sides have diverged massively from one another. A big move either way is very close at hand.

Vix – The descending wedge was tested today and reversed. This is a bullish pattern which historically breaks higher.

Two Year Futures – All time highs are a breath away.

Ten Year Futures – All times highs are also very close.

AUD/USD – Resistance is being tested as is the 200MA. Notice the multi month downtrending channel.

USD - Still sitting above support but struggling to take out 81.50 beyond one day. As stated yesterday a lot of currencies are stretched and currency pairs do not trade in a vacuum. AUD/USD seems most stretched to the upside right now.

SPX – Notice where price was stopped today. This is a major resistance level with multiple price touches over the past 9 months.

Mid Cap Futures – Coming right into resistance on the ascending wedge.

Bottom Line

Unless credit and currency signal a change this trade is still on. I’ve stated a number of times failure to understand the basis for this trade can make days like today very confusing. The EUR against a number of currency pairs is trying to reverse which is causing the EUR to move higher against the USD but nothing in terms of major resistance has changed. We have seen these “one day”  reversals in the EUR or USD before. USD is also coming into support which has held since 11/9/11.

This credit event is far from a crowded trade. Credit continues to deteriorate not improve. What is probably most telling is that in the face of a lot of central bank selling of US Treasuries they continue to hold all time prior highs and pushing a breakout. Credit looks very strong right here in terms of price. So what we have now is credit and equity both trying to breakout. Only one will have the capital needed to achieve that.

We will know something soon.

Images: Flickr (licence attribution)

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