Source:
Roque on Hedge Fund Performance, Strategy (Bloomberg)
Expert technical analysis of financial markets by JC Parets
by JC
Source:
Roque on Hedge Fund Performance, Strategy (Bloomberg)
by JC
Everywhere I turn all I hear is Euro this Euro that. How many countries are leaving the Euro zone? Almost like if it’s assumed that someone’s leaving, and all we’re concerned with now is who and how many? Not if we should short the Euro, but how aggressive should we be?
There are some important resistance levels that I’m looking at right here on the US Dollar Index. Remember that the Euro is by far its biggest component. I’m finding it really hard to get bullish on the Dollar when I look at this chart. We know that the long-term trend for the Dollar is to the downside (not a secret). So if I’m going to be wrong, I’d prefer to be wrong in the direction of that underlying trend.
Sam Stovall today:
“From a contrarian viewpoint, the extreme bullishness toward the dollar, and bearishness toward the euro, suggests to us that these currencies are closing in on a major reversal of fortune, which could be bullish for stocks,” said Sam Stovall, chief equity strategist for Standard & Poor’s.”
For now, I don’t buy this Dollar “breakout” and would caution those looking to get long here. Remember that from false moves come fast moves – in the opposite direction. Buyer beware.
Source:
Stocks Gains as Economy Shows Some Strength (CNBC)
$UUP $DX_F $FXE $EURUSD
by JC
These charts were sent to me by a good friend James Bartelloni. He is a U.S. Navy veteran and spent 12 years in the cockpit as a TOPGUN graduate in the F-14. Having graduated from the US Naval Academy with a BS in Mathematics, he later went on earn his Chartered Market Technician Designation. He sometimes uses a bit more of an unconventional approach to technical analysis and calls himself an ‘Intermarket Musician’.
Bart is showing us the positive correlation between the Nasdaq Composite and Palladium. The first chart shows the prices of both over the last year. The Second chart is a longer-term comparison of Apple ($AAPL) and Palladium where he points out that in 2003, the correlation really syncs.
(Click Charts to Embiggen)
Bart suggests watching Palladium. “If it goes down the techs go down. No one really leading, they are a little coincident and very correlated”. Here is the third chart he sent over, this time of Palladium alone. Based on some measured moves, he sees a potential top coming the price of Palladium. (Click Chart to Embiggen)
Thanks for the charts Bart.
Tags: $AAPL $PA_F $PALL $COMPQ
by JC
What? You didn’t read about the Eiffel Tower topping pattern in your Edwards & Magee textbook?
The great Chris Kimble of Kimble Charting Solutions originally came up with the idea:
“When an asset starts looking like the left side of the Eiffel tower, one should consider reducing some exposure to this holding, because odds are high that if you see the left side of the Eiffel tower, somewhere down the road you will see the right side of the tower (in the chart pattern)!”
The behavior of the Shanghai Composite over a two-year period beginning in late 2006 is a classic example of this Eiffel Tower Formation:
Doug Short has a great post up today about the Shanghai Composite. It logged its 4th consecutive daily decline today and the 15th decline in the last 20 sessions. dshort also includes a logarithmic chart in his post showing a less funny, but much more accurate visual representation of price movements over time. Go check it out.
Sources:
The Shanghai Tower and Aftermath (dshort)
Chris Kimble – A New Eiffel Tower Pattern in the Making (dshort)
Tags: $SSEC $FXI $EWH
by JC
The Volatility Index has practically been cut in half since the highs earlier this year. With the Index right now in the mid-20s, it is interesting to note that historically the $VIX loves to make 52-week lows in December. We know that the $VIX and the S&P500 are inversely correlated. So it makes sense that while seasonality favors stocks going into year end, this is usually a time for volatility to subside.
According to VIX AND MORE, “In any given year, there is about a 40% chance that the $VIX will make its annual low in December”. In addition, “the bottom usually comes in the last half of the month and most often just before Christmas.”
Last year’s December low in the VIX made it five pre-Christmas bottoms in eight years. In 2009, the $VIX made its annual low on Christmas eve. In 2004, the lows were put in on December 23rd. In 2003 & 2006, the $VIX bottomed out for the year on December 18th.
This chart shows the Monthly Distribution of Annual Lows in the $VIX going back to 1990. No other month is even close:
From VIX AND MORE – In three trading sessions the VIX is already more than 20% off of its 30.91 close from last Thursday. It seems rather far-fetched to think that the VIX will plummet all the way below the current 2011 low reading of 14.27 from April 28th of this year (a date that is provisionally included in the chart) but stranger things have happened.
Source:
by JC
After a very positive week, it was a “risk-off” day from the start on Monday. For some insight on the future direction for equities we want to be watching 3-month LIBOR right here. The London Interbank Offered Rate (LIBOR) determines what banks charge each other for loans. Notice the spike in LIBOR during this frustratingly choppy correction throughout the second half of this year.
We are approaching last year’s highs in LIBOR that simultaneously marked the end of the 2010 stock market correction. Going forward, does the current spike in LIBOR continue? Or do we peak around here again igniting a new uptrend in stocks?
I have consistently been in the camp that this market correction is just that – a correction from the rally that started in early October. LIBOR not correcting questions that. If you’re a bull then you want to see the Interbank Rate roll over. If you’ve been stubbornly bearish during this 2+ month rally, then you want to see this rate continue higher to confirm your thesis.
More on this later this week.
by JC
Here is nice headline to take us into the weekend. In case you didn’t know, Sam Stovall is the the real deal technician. I know he’s always talking earnings multiples and GDP protections, but don’t let him fool you – the man knows his Technical Analysis.
He’s looking for 1400 on the S&P500 next year, which would take us to those key support & resistance levels from 2007-2008. After breaking support in the early days of 2008, polarity came into the picture turning that 1400 area into major resistance in May of that year:
From AdvisorOne:
Sam Stovall, chief equity strategist at S&P Capital IQ, suggested Friday, with the appropriate caveats, that the S&P 500 may well return in the mid-to-upper teens in 2012. In fact, S&P Capital IQ’s Investment Policy Committee forecasts that the S&P will end 2012 at 1,400, or a 13.5% advance over the Dec. 8, 2011 close of 1,234.
Stovall notes that “history indicates, but does not guarantee, that the S&P 500 return in 2012 will likely be positive,” and goes on to note that since 1900, the median difference in annual price performances for the S&P 500 was 17 percentage points. But using the median 12-month forecasts from each of the Investment Policy Committee members, the group suggests a 15 percentage point change from 2011’s YTD result.
The key factors cited by the committee:
(Stovall will appear on a Dec. 14, 2011 free web seminar sponsored by S&P Capital IQ: ETF Outlook: Equities, Biotech, and Fund Launches, in which he will discuss the equity markets in 2012 and favorable ETF plays.)
Source:
Sam Stovall Sees a 13% Advance in S&P500 for 2012 (AdvisorOne)
by JC
Here is my story for SFO Magazine this week:
STOCKS: Spotlight on Consumer Discretionary Space
Friday, December 09, 2011
By J.C. Parets
Pessimism still rules the streets, but this stock market isn’t going down without a fight.
The S&P 500 is up about 8% from the low two weeks ago. But, the 200-day moving average is still the barrier of entry into Santa Clause Rallyville.
There are a few positive developments recently. The Dow Jones Industrial Average has managed to, not only get back above its 200-day moving average, but more importantly has remained above it all week. The same thing can be said about the Nasdaq 100. The Dow Jones Transportation average, however, is still struggling to break through like the S&P 500, but both appear poised for a breakout.
SECTOR SPOTLIGHT
From a sector-by-sector outlook, the strength in the consumer discretionary space cannot be ignored.
As of this morning, SPDR Select Sector Fund (XLY) is just 2% from breaking out to levels not seen since July. If this stock market is going to rally into year end, we want to see continued relative strength out of this area, specifically retailers ($RTH) who hit all-time highs earlier this week. Major components of the consumer discretionary sector McDonald’s ($MCD) and Home Depot ($HD) continue to make new highs. This is very encouraging for the broader market.
From a relative standpoint, the discretionary space is not doing as well as we would like to see when compared to the more conservative consumer staples sector. When the $XLY:$XLP ratio is rising, the market is telling us that participants are willing to add more risk to their portfolios. The opposite is true when this ratio is declining. When we compare this risk-on/risk-off ratio to the S&P 500, we can see the ratio lagging.
Check out the rest of the story at SFO Magazine
Tags: $DJIA $IYT $XLE $FXE $SPY $QQQ