The markets are moving, that’s for sure. Take it away Brian:
Follow Brian Shannon on Stocktwits @Alphatrends
And be sure to check out www.alphatrends.net
Expert technical analysis of financial markets by JC Parets
by JC
The markets are moving, that’s for sure. Take it away Brian:
Follow Brian Shannon on Stocktwits @Alphatrends
And be sure to check out www.alphatrends.net
by JC
We may not be able to address our current debt ceiling woes, but we can at least put them to a good beat:
And I give you the US Dollar to analyze while you watch…..
Source:
Humanity’s Prayers Answered: Raise The Debt Ceiling Rap (Wall Street Journal)
by JC
Louise Yamada is hands down one of my favorite Technicians of all time. Since I first got into looking at charts to supplement my market analysis, I have looked up to her as a mentor. I’ll never forget the first time I saw her speak to the Market Technicians Association years ago. We were in the huge conference room up on the 6th Floor of the Bloomberg Building, and after several speakers went up with their elaborate power point presentations, it was Louise Yamada’s turn to do her thing. She completely ignored the computer provided for all of the speakers and pulled out these huge hand drawn historic charts of Citigroup and General Electric. The charts were bigger than she was. She held them up over her head proudly and completely crushed the dreams of the $C and $GE bulls in the room. This was back before they crashed – she nailed it.
This week she sat down with King World News to discuss her outlook on precious metals, Inflation and the US Dollar:
“Gold continues to be in an uptrend in our work. You had a little bit of a consolidation, seasonality would suggest a rise into the fall. The primary support level remains at $1,475…Our next target is $2,000, and we did a gold special in our last piece that suggested from a very long-term perspective…we could see $5,200 on gold.”
She has been bullish on Gold for a long time. Here at Allstarcharts, we have been discussing Gold for a while, but its Silver that gets the Volatility. It’s Silver that gets the headlines. It’s Silver that people want to know about:
“We hit part of our silver targets at $50, (expect) $65, even $80, $85 over time. We had an 88% rally in a very short period of time from January and a one third retracement, 34% down, so that was pretty normal. We saw some support at $33 and would loved to have seen it go sideways a little bit longer to be honest with you.”
But lets talk a little bit about the Denominator in this whole thing. The bottom half of these ratios are just as important as the top half. The US Dollar as we all know doesn’t stop going down. Literally, we’re going on 10 years of declines:
“I think that one of the observations that one has to take into consideration is that with each of the Euro financial crises and our own financial crisis in 2008 to 2009, the dollar has rallied less!
In other words you had a rally in 2009 that carried 25%, then in early 2010 the rally was only 19% and the second one in 2010 was only 7% and this time you haven’t even seen 7% with the crisis that has evolved. So that suggests to us that it (the dollar) is becoming less and less considered a really safe haven. Bear in mind that the 80 level for the US dollar is a major 34 year resistance level now having broken down through that in 2006, 2007. So our longer-term declining dollar profile remains in place.”
There you have it. Directly from the horse’s mouth. A legend in the field of Technical Analysis telling it how it is. We’ll keep watching these charts closely for any signs of a major change. Meanwhile, I think it’s best to stick with the major trend that has been in place, is currently in place, and will stay in place until proven otherwise. I’m not in the business of fighting these monster themes.
Go check out Louise Yamada Technical Research Advisors, LLC
Source:
by JC
Technical Analysis is not just about looking for chart patterns on $10 stocks. When you venture into other asset classes you open yourself up to a whole new world of Intermarket Analysis. When money is moving into something, it has to come out of somewhere else. Understanding the behavior of the asset classes and how they are correlated with one another is fascinating to me.
Last week we put up a post: Putting Gold prices in Perspective. We looked at Gold relative to US Equities and also adjusted the yellow metal for inflation to get a Real idea as to where prices are currently when compared to historical data. Today I would like to take a closer look at US Treasuries and see whats been going on there. Doug Short, as usual, puts up some incredible charts that really tell the story:
The first chart shows the 10-Year Constant Maturity yield since 1962 along with the Federal Funds Rate (FFR) and inflation. The range has been astonishing. The stagflation that set in after the 1973 Oil Embargo was finally ended after Paul Volcker raised the FFR to 20.06%.
The Next two charts show the impact that the 10-Year yields and Federal Funds Rate has had on the S&P500. The first one adds the nominal chart of the S&P, which significantly distorts the Real value of both Stocks and Yields. This is why brilliantly, dshort created the 2nd chart, which not only shows the S&P500 adjusted for inflation, but also subtracts the annualized Inflation rate from both Treasury yields and the Federal Funds rate.
Using the seconds chart, we can better understand the severity of the decline in equities from the mid-1960s to the bottom in 1982. And we can also see why high yields can be deceptive in periods of double-digit inflation. dshort points to the FFR red line as the most interesting series in the charts. We can see how the Fed has used rate to control inflation, accelerate growth and, when needed, apply the brakes. Unfortunately, the FFR has been virtually zero since December 2008, so it is no longer available as a tool to stimulate the economy.
When looking at historical data, it is important to me to compare apples to apples. Doug Short does a great job of this as usual. His site is a must read so go check it out at www.dshort.com
Source:
by JC
European Bond Spreads (CalculatedRisk)
What is Chaikin Oscillator $MSFT (StockCharts)
All of the Countries the US Owes Money to (FlowingData)
Moise Levi – It’s Time to Buy $CSCO systems (AlphaGlobalInvestors)
3 Chemical Stocks on the All-time High List (Ivanhoff)
Joey Fundora, “I am a Trader” (Downtowntrader)
$MSFT Online Operating Income (SiliconAlleyInsider)
Good Luck Corn Traders (ResearchPuzzle)
Financial vs Non-Financial Industry Profits (PragmaticCapitalism)
Where’s the Beef – Live Cattle Daily Bars (StockTradersAlmanac)
$XLU Breaks Cup-With-Handle Resistance (StockCharts)
Earnings Triple Plays – Beats earnings estimates, Beats Revenue Estimates, and Raises Guidance (Bespoke)
by JC
Via Barry Ritholtz:
(Projected Market Value panel/Actual Value lower panel)
Ritholtz – Apple’s blowout numbers this week got tongues wagging about the tech juggernaut. David Wilson at Bloomberg charts the answer to the question as to when Apple Inc. ($AAPL) will overtake Exxon Mobil ($XOM) as the world’s most valuable public company. Apple is currently at ~$358.7 billion, a mere 13%behind Exxon Mobil at $410.3 billion.
Short answer: At the current pace, less than 12 months.
That assumes analysts’ share-price estimates are on target; so far, they have been too low in terms of earnings and revenue forecasts.
Source:
by JC
On Monday we discussed the fact that Energy has just broken out of a small downtrend relative to the S&P500. More importantly, this breakout came within the context of a much larger relative breakout that occurred this past Fall.
Yesterday, Arthur Hill over at Stockcharts.com posted this sector performance chart above. He went on to say that,
“…the Energy SPDR ($XLE) is the standout performer over the last 10 trading days with a 2.1% gain. In contrast, the S&P 500 is down around 1% during this timeframe. Industrials and finance have weighed on the S&P 500 the last two weeks, but technology is in the green”
This seems to be an ongoing theme here as energy outperforms the overall market. The US Dollar deteriorating everyday doesn’t hurt either. Take a look at this garbage Dollar Index:
It has been in a decline for as long as I can remember. Every consolidation has been just a breather before the next leg down. The most recent symmetrical Triangle seems to be another perfect example of this. Soon we will know for sure, but I think that we need to look at the Dollar as Guilty until proven innocent, as Brian Shannon @Alphatrends likes to say. I see no reason to think that we are at a major turning point for the Dollar here. I see a declining 200 day moving average and RSI continues to stay in bearish mode.
Show me US Dollar. Prove me wrong….
Source:
Energy SPDR Leads Sectors Over the Last 10 Days (Stockcharts)
by JC
I know I know Financials are a disaster. They really are though. Technician John Roque has been all over this one constantly preaching to stay underweight financials. I don’t disagree at all. However, every now in then there is nothing wrong with a little reversion to the mean trade as long as you’re managing risk properly. I’m in the camp that the market is healthy and that this long consolidation resolves itself to the upside. That is still to be proven. At the end of the day though, money needs to be put to work. Or not put to work and hide in other assets such as Gold or Cash or Treasuries. I’m not a fan of Treasuries here or too much Cash, but I do like precious metals. How can you not? But for a trade, just for a trade, banks are worth looking at because I think they present a decent risk/reward right here.
The Financial Sector ($XLF) sets us up with a trade that has an easy exit below this week’s lows. RSI is showing a bullish divergence that could add fuel to the fire. Most importantly, in my opinion, is that the low made on Monday could not hold and could create the short squeeze that takes the sector a lot higher.
The Philadelphia Bank Index ($BKX) and the Dow Jones Broker Dealers ($IAI) tell a similar story:
From a company specific point of view, some banks look worse than others. Before yesterday, Bank of America ($BAC) was down 9 days in a row. 9 days in a row? Really? How is that even possible? Well before Tuesday, Gold ($GLD) was up 10 days in a row. It just goes to show you that we are in a market environment where it does not pay to be trading in the direction of the major averages. Because there is no direction. Pick your spots: your longs and your shorts. This is good example of that:
Anyway, getting back to the bank stocks, I would look for the best risk vs reward set ups that correspond with your objectives and risk tolerance. Listen, some of these names look like death: $BAC $GS $MS $JPM. Other names, however, didn’t make new lows this week like $C and $BK. There are a few that actually look stronger than others, $USB and $WFC, but probably won’t get the high beta, reversion to the mean move that you might get in the horrible looking ones like $BAC. It really all depends on what you’re looking for and how much you’re willing to risk.
Risk is the key word here. The old saying goes that,
Bottom Fishing Can Be Very Hazardous to Your Wealth
This is very true my friends. So have your exit strategies in place before pushing any buy buttons. The recent lows are where I would put mine.