Courtesy of Scott Martindale, Sabrient Systems and Gradient Analytics
Greece, Spain, Italy. Eurozone. Austerity. For stock investors, it’s just more of the same–the same rollercoaster of hope and despair about any of a number of potential outcomes…without resolution. On Wednesday, stocks had their strongest one-day rally since December. Ostensibly, it was due to word on the street that central banks and the Fed will coordinate a global money-printing operation to deliver us all from the threat of global recession.
Whatever the cause of Wednesday’s rebound, whenever the charts are buried in the depths of oversold territory, anticipation of a sudden reversal is high, and nobody wants to be the last one on the bandwagon if and when the tide turns. A hopeful story like we heard on Wednesday will often lead to a powerful relief rally. But will there be follow-through? Well, the fact that traders didn’t take profits before the close of trading is a promising sign.
Fed Chairman Ben Bernanke is scheduled to testify before a congressional committee on Thursday. And the new Greek elections are set for June 17, which may determine the future of Greece as a member of the monetary union. With their 10-year bond yielding over 30%, something is going have to change. But if they want to print their own money, it will have to be a return to the Drachma.
SPY closed Wednesday at 131.97 to get back to where it was last Wednesday and recapture the 200-day simple moving average that it had briefly lost. The bear flag pattern from last week was indeed confirmed on Friday, but the chart suddenly looks much better after Wednesday’s strength. RSI and Slow Stochastic diverged from price by forming higher lows. MACD looks less impressive, but might be ready to turn up, as well.
The TED spread (indicator of credit risk in the general economy, measuring the difference between the 3-month T-bill and 3-month LIBOR interest rates) closed Wednesday at 39 bps, holding the same level that appears to be its new comfort zone. The VIX (CBOE Market Volatility Index–a.k.a. “fear gauge”) closed Wednesday at 22.16, down 10% on the day. Given the persistent worries about global recession, both VIX and TED remain low.
As a reminder, The MacroReport provides an in-depth analysis of the macroeconomic trends in around the world and their impact on the U.S., along with…
