Daily bars do not show us much in the way of an established trend. However, they can offer clues of a pending change. Such clues may be presenting themselves on the markets right now, including some potential of an asset class rotation. Caveat here: the data presented is looking at daily bars over a one month period. Take it for what it is—a near termed observation only.
Let’s take a look at the daily pattern for the US DJIA index. You can see on the chart below that it began an early pattern of lower highs and lower lows. You can also see a daily chart pattern for bonds on both sides of the border – which was bullish from mid-April while the Dow was beginning to roll over. Currently, that bond market strength is in question, as you will see in my notes below and on the high/low indications on the charts.
Given that we’re only talking of a few weeks of daily data – these observations are not established enough that one would want to assume a trend to trade off of. But they are worth noting. These charts show us the potential for an interim rotation into bonds and a continued correction for stocks, should this pattern continue. My notes below pertain ONLY to the daily bars and potential trends arising from those daily movements.
S&P TSX 300
No new high yet, no trend (flat)
Dow Industrial recent peak/trough readings
Lower highs and lows. Trend = down
XBB-T iShares Canadian Bond Aggregate Index recent peak/trough readings
Was trending up. Currently trending down, lower high/low.
AGG iShares US Bond Aggregate Index recent peak/trough readings
Was trending up. Currently trending down, low taken out.