August 2012 – Page 2 – Andrew Thrasher

Is The 10-Year Yield Calling For a Rise in Bond Prices?

Posted on August 22, 2012 by Andrew Thrasher

Well the S&P 500 finally saw some weakness yesterday. Based on what I’ve seen on various blogs and Twitter, it’s amazing how quick trader’s sentiment flipped to bearish. The last few weeks it felt like traders hated the rally, but the smarter ones knew not to fight the tape and to respect Mr. Market. Has the tide shifted? We shall see. My take on things is pretty well documented on this site so I won’t rehash it now.

Bond’s have been a big story it seems this year, with yield taking out a new all-time low in July, it’s hard to believe that we are already at a point of being potentially overbought on the 10-year yield. Which is the chart I wanted to share with you today.

Below we have $TNX, the yield of the 10-year Treasury Note. On the top panel I’ve plotted just a simple 14-day Relative Strength Index (RSI). I’ve put blue circles on past occurrences of the RSI breaking above 70, and as you can see, this has resulting in past resurgences in bonds (with yields dropping as the chart shows). 10-year yield has also found its 200-day moving average (blue line), which is acting as resistance.

So we have momentum possibly being overbought and resistance showing up for the yield on 10-year Treasury bonds. Pre-market action this morning in $TNX appears to be confirming this, dropping to 1.76 at the time of this writing.

Disclaimer: Do not construe anything written in this post or this blog in its entirety as a recommendation, research, or an offer to buy or sell any securities. Everything in this post is meant for educational and entertainment purposes only. I or my affiliates may hold positions in securities mentioned in the blog. Please see my Disclosure page for full disclaimer. Connect with Andrew on Google+.

The Australian Channel

Posted on August 21, 2012 by Andrew Thrasher

I want to look at the Aussie dollar (AUD) today, which I’ve discussed has had an interesting relationship with U.S. equities (here and here). I often view the AUD as a leading indicator for what could happen in our own market here in the U.S. So not only is it important to know what’s going on in non-U.S. markets, we also must recognize the possible impact those markets have on our own.

It seems the Australian dollar has been trading in a rising channel, which it is currently at the bottom of. When turning our focus to the Relative Strength Index (RSI), we see it is also in a channel, which creates a negative divergence from price. I’ll be watching to see if price breaks out of its channel, will the RSI follow in breaking out of its own sideways action.

Sucks to Work at Facebook

Posted on August 17, 2012 by Andrew Thrasher

I don’t have to tell you what’s been going on with shares of Facebook, down over 50% from its IPO price. On Thursday a lockup for certain owners of Facebook expired, which was widely watched by many on Wall Street. One thing that I think that has been missed is that wasn’t the only lockup for $FB shares. There are still three more with the largest one coming in November.

From the WSJ:

Employees who own Facebook shares are only able to watch at this point. Lockup expirations in October, November and December will allow Mr. Zuckerberg and other employees to sell more than 1.4 billion shares. The biggest lockup expiration, freeing more than one billion shares, is set for Nov. 14. The last lockup expires next May.

For many employees, however, selling shares later this year may not be a palatable option. Facebook’s stock has so far fallen about 48% since the IPO, pushing its market capitalization down to about $42.6 billion.

So you started working for the giant social media company and were offered shares before the company went public. You were probably thinking you’d be able to retire at the ripe old age of 32, only to see your Zuckerberg- sponsored retirement get cut in half.

I’ve seen a lot of people discussing the recent lockup expiration, calling for the coast to be clear now that all the built-in sellers are gone. This just isn’t the case, as the WSJ article states, there are still three more lockup periods to expire. Will shares continue to sink into the abyss as the remaining lockups expire? Beats me, my crystal ball is still in the shop. As always, create a plan that works for your risk appetite and stick to it.

Henry Blodget over at Business Insider also wrote a great piece today directed at Facebook employees.

Source: Facebook Investors Cash Out (Wall Street Journal)

What A Borning Market

Posted on August 16, 2012 by Andrew Thrasher

I haven’t posted very much this week due to the lack of movement in just about everything. As you well know the market has been in a very tight range lately. I read a statistic yesterday that last week’s movement (or lack there of) in the Dow was the tightest range since January 2007.

I’ve noticed that the Aussie dollar has been weakening slightly and new 52-week highs have continued their decline, diverging from the major indices. It feels like traders are holding out for Jackson Hole and see if Bernanke pulls out his bag of tricks. Until then we will continue to respect the market action, as boring as it may be.

Natural Gas Support

Posted on August 13, 2012 by Andrew Thrasher

Natural gas appears to have found its 50- and 200-day moving averages. It’ll be interesting to see if these can hold as support after the commodity had a nice rally since mid-June. Looking at momentum and money flow, both the RSI and MFI had been negatively diverging from price but have not reached what have previously been ‘oversold’ levels.