Friday, September 19, 2008

Anatomy of a Market Turnaround: Tracking Intermarket Themes





With the midday turnaround in the S&P 500 futures (top chart), note how we also saw a plunge in gold (second chart), a fall in the euro vs. the U.S. dollar (third chart), and a fall in the price of short-term Treasuries (bottom chart). Gold had represented a safe haven during the market decline; the U.S. dollar was under pressure during the decline due to failing financial firms; and short-term Treasury instruments served their role in a flight to safety during the decline. The simultaneous unwinding of these themes was a strong indication that market sentiment had shifted in a fundamental way.
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2 comments:

Firebird said...

Dear Dr. Steenbarger,

My view on this rally: http://www.youtube.com/watch?v=M1owcncKCHg

Disclosure: I've been in the green both upwards and downwards (not sour about the FED screwing me or anything), I just think there's nothing to celebrate really and that this is a sad day for the free world (this is starting to eerily remind me of Atlas Shrugged).

Best trading,

Jorge

Brett Steenbarger, Ph.D. said...

Yes, the Atlas Shrugged analogy has been bandied about in quite a few trading rooms!

Brett