Tuesday, June 30, 2009

Anatomy of a Stock Market Breakout

After trading in a narrow range overnight and early in the morning, consumer confidence data came in much weaker than expected. If you click on the Market Delta chart above, you'll see within the bars how large size began hitting bids as the ES market moved below 923. At the same time, we saw a strengthening dollar and weakening gold and oil, both recent bearish themes for stocks, as 10-year yields pulled back from the day's highs. The appearance of volume brought volatility and the simultaneous move among asset classes reflected the fact that the morning numbers were, indeed, a game changer. It's the breakouts accompanied by significant directional volume and correlated movements among related asset classes that are the most trustworthy.