Back and Fill

Well, the SPX fell yesterday....but not quite enough to signal a greater likelihood of a deeper drop, closing just above its 200 day moving average, which, as we established in yesterday's comments section, is either an important technical signpost or a load of old rubbish.

Regardless, it is worth noting that volumes have not yet spiked in a manner characteristic of an impulsive sell-off. Perhaps Macro Man has some company in waiting to see how the current back-and-fill price action resolves itself. It's interesting to note, though, that VIX has seen a small spike recently, and Macro Man has heard some rumblings of bets being put on for a forthcoming volatility spike.
In any event, and following on from yesterday's debate in the comments section, Macro Man's reading of the technicals leaves us somewhere in no man's land in a number of markets. To be sure, there are some interesitng tactical trades to be made, but as of now it is difficult to say with an investable degree of certainty that the reflation trend of the last three months will either continue or reverse.

A visual example of this transition from trending to back-and-fill can be seen via RSIs, which can seen as a barometer of the strength of recent trends. As you can see, over the past few weeks the RSIs for the SPX, EUR/USD, gold, and 10 year Treasury yields have all ebbed from their highs.

Macro Man could see more of the same for the remainder of the week, as next week may prove critical for determining the fate of the recent reflationary trend. The FOMC announcement and the ECB tender will be fascinating, as will the usual month- and quarter-end scramble.

Macro Man has his biases of how things will play out, and has allocated a bit of capital accordingly. He hopes to get more resolution from both the newsflow and the price action over the next seven and a half trading days.