Despite dangling at the 20 DMA support, the action in the market has broken most of the good trading patterns. As a result, there are no compelling reasons to enter any trades.
As an example, PLCM has looked as the standard bullish-flag consolidation pattern until yesterday when the NASDAQ sell-off broke trader belief that the 20 DMA is support.
To see where support in the stocks is, if any, more waiting is required but during the wait a conspicuous dollar-yield divergence is once again sneaking up on the market.
During last year’s April-July market tremors, yields were dropping as dollar was rising. The dollar-yield X-formation highlighted in the chart is the result of falling yields and rising dollar that coincided with a rout in the stock market during that April-July timeframe. Fast forward to right now and dollar up, yield down is in a replay mode.
The dollar-yield divergence is not in standard economics which argues that currency value rises as interest rates go up, unless fear was descending on the market. Back then, the fear was Greece, but market almost never reacts on the same thing twice so what is it this time?
There was the muni-bond panic, the euro panic, the Greece panic, the dollar panic, the quantitative-easing panic, the inflation panic, oil and gold and commodities panic, the Japanese earthquake/nuclear-disaster panic, the Middle East panic, the S&P U.S. ratings panic.
To keep it current, we’re in the middle of the debt-ceiling panic and the International Monetary Fund sex-crime panic.
It is a well known that market rarely moves for reasons that media reports so that spells some respite for Strauss-Khan: him raping a hotel cleaning lady cannot be the cause of market fear.