An Emotional Market

Figure 1. TLT -- 20 year US Treasury ETF (5 year monthly chart)

Figure 2. SPY (6 month daily chart)

Despite the run up last week I still find this to be a challenging market. I prefer not to trade, or trade much more cautiously, when markets are at emotional extremes. We saw a similar situation in the Panic of '08 when the market took a nosedive and investors rushed to US treasuries (see Figure 1). The market has struggled over the last few months and we see a similar situation with money moving into US Treasuries. Last week we did start to see money move out of treasuries and back into stocks. The TLT (US treasury ETF) went to a high of 125 and has currently sold off to 114. Perhaps fear in the market is starting to subside. The SPY is currently at the top of it's trading range (see Figure 2). If we can break above and hold above 122 on the SPY it could make for an environment where long side swing trades offer  a reasonable risk to reward ratio.