I know a lot of you have heard the main reason for the correction is the inverse relationship with the oil market. I’m sorry, I’m not buying it. I’ve been watching the bond market very closely and last week when the long bond rallied up to its 6 week consolidation high the equity markets were threatening to break down in a bigger way. When the bond market backed off, equities recovered. The bond market stayed up late last week when equities sold again. It was only on Friday where they backed off resistance did buyers come back into stocks. The problem going forward is the fact the bond market has violated out of the bear channel since October which suggested an intermediate low is in. I think the stock market is mortified by higher bond prices. I don’t see the bond market collapsing right now so we could end up in a big trading range in bonds which would lead to a continuation of the complex pattern we’ve seen in the stock market the past 3 weeks.
Consider the events of Friday. Civilization most certainly must and will do whatever they can to help our friends in Japan. However, that doesn’t change the fact it could choke off the weak recovery for the time being. Remember, the panic of 1907 came after a period of blistering growth due to the Industrial Revolution. We had no such blistering growth prior to the meltdown in 2007. This period of prosperity was smoke and mirrors. It will be interesting to see what happens if and when the bond market breaks through resistance.
I’d like to invite you to a free webinar I’m doing at the Traders Coach web site this Wednesday evening at 8:30 pm EST.
This is the link you need to register. We’ll be discussing how you can harness the power of Andrews, Fibonacci and Gann to catch important turns in the markets.
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Jeff Greenblatt is the author of Breakthrough Strategies For Predicting Any Market, editor of the Fibonacci Forecaster, director of Lucas Wave International, LLC. and a private trader for the past eight years.
Lucas Wave International (https://www.lucaswaveinternational.com) provides forecasts of financial markets via the Fibonacci Forecaster and other reports. The company provides coaching/seminars to teach traders around the world about this cutting edge methodology.