It’s All About Bond Yields and the Market’s Breadth. Plus Update on Last Week’s Trade.

Inflation Data Tomorrow and Wednesday looms over market.

The stock market continues to gyrate as traders juggle with the fallout from last week’s crash.  The best strategy remains one in which patience combined with monitoring of reliable indicators dictate the next course of action. Meanwhile, the inflation numbers due out this week (PPI and CPI on 8/13 and 8/14) could certainly change the current trading environment. Better than expected numbers will likely be positive for bonds, and perhaps stocks, while a rise in inflation could push prices toward a retest of the recent lows.

Currently, the most reliable indicators seem to be the New York Stock Exchange Advance Decline line (NYAD) and the U.S. Ten Year Note yields (TNX).

This morning, NYAD remains in its recent consolidation pattern, well within reach of a new high.  Thus, for now, the stock market gets the benefit of the doubt. Interestingly, the Nasdaq 100 index (NDX) where, of late, most of the damage has been done due to the selloff in ADI related tech stocks is also fairly sedate as the 18,500 level is being contested.

Note that there are two large VBP bars in this price area, which means that there are lots of buyers and sellers fighting over this territory.  A failure here would likely lead to a retest of the 200-day moving average.

Finally, the U.S. Ten Year Note yield (TNX) is holding steady, just below 4%.  This is encouraging, although it can certainly change after the inflation data is released.

I have an update on Friday’s trade just below and I will be updating all the recent trades in a post tomorrow.

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