It’s the economy stupid!
Let’s start with last week’s most important chart, which was the yield on the 10 year Treasury Bond. See figure 1, a weekly chart. Ooops! That breakout into the trend channel never materialized. Bonds appear to be headed higher (yields lower) as economic weakness comes front and center.
Figure 1. $TNX.X/ weekly
This week’s most important chart is the S&P500 Depository Receipts (symbol: SPY). See figure 2 a weekly chart. The break out above the rising trend line seems to be a bull trap especially since prices are trading back within the trend channel. The breakout coincides with the QE3 announcement. Ooops! Maybe QE3 won’t have the effect on stocks that investors had hoped. Failed breakouts are never good.
Figure 2. SPY/ weekly
So the big question remains: will economic weakness trump QE3? Which force will have its way with the markets?