The collision of global markets and social mood

Wednesday, October 15, 2014

Cigarette Boats And Leverage

The bond market dwarfs the stock market. The 10-year note is like a huge supertanker. It just took off like a Cigarette boat. It's up over a full point.

S&P futures are tanking. The Empire State manufacturing index collapsed. Oil held 80.01 but looks shaky. 1814.36 looks like the next test. And 1737.92 waits if needed. Leverage is unwinding which makes the down side unpredictable depending on how much gets unwound.

At this point 1970.36 remains the crucial bull/bear line.

If indeed the S&P concluded a rising wedge or ending diagonal (as was exhaustively presented here for months), the first target is 1737.92. That's why these patterns are worth the trouble: they're very mechanical and straightforward.

Otherwise, the action in the 10yr feels a bit capitulative. Either the decline from 1970.36 forms an extension today to far lower levels, or it has the potential to create a wedge itself, in this case a bullish falling wedge.

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