Friday, 29 May 2009

US equities taking a lot of bad news in their stride

The near term direction of US equity indices remains an enigma wrapped in a mystery to me and I can be easily persuaded that there is a major vacuum below current levels on the one hand, or by plausible arguments that in the algorithmic trading domain that predominates - the rotation strategies are currently showing a tilt towards rally continuation.

As we have seen consumer confidence numbers respond very positively to higher equity prices and one must assume that that is a major strategic objective of the relevant interest groups.

The S&P 400 Midcap index reveals that an overhead barrier has contained prices since early May and that there is a sideways pattern following the violation of the very steep uptrend line through the lows. It seems that the bears are having difficulties gaining traction so it is conceivable that a decisive break up to the 200 day EMA could bring even more of the long only fund managers who are falling behind back into the game.

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