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Business Day AM: February 1, 2013 (BNN)
Tags: $SPY $DJIA $IWM $MDY $IYT $KC_F $JO $EWJ $NK_F $DJX $USDJPY $FXY
Expert technical analysis of financial markets by JC Parets
by JC
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Source:
Business Day AM: February 1, 2013 (BNN)
Tags: $SPY $DJIA $IWM $MDY $IYT $KC_F $JO $EWJ $NK_F $DJX $USDJPY $FXY
by JC
The Dollar is flirting with some dangerous levels here. This support right around 79 represents the potential neckline for a head & shoulders pattern that would confirm a continuation of the downtrend.
After rallying into last summer, the US Dollar got hit hard into September. Since then, it has been building this interesting, yet bearish, pattern that looks to be resolving to the downside.
Here is the chart of the US Dollar Index Futures:
The 2.5 point height of the pattern would give us a measured move down to about 76.5 upon completion. The Euro strength lately cannot be denied, and looking at this chart above it’s easy to see why.
We’ll certainly be watching this chart closely as US Equity markets tend to correlate negatively to the US Dollar. The 1 yr correlation is about -0.70 with the S&P500 and -0.70 for the quarter as well.
Stay tuned…
Tags: $UUP $DX_F $SPY $SPX $EURUSD $FXE
by JC
Paul Vigna over at the Wall Street Journal asked me to come by this morning to discuss how important the Super Bowl Indicator is to the stock market. Fortunately 2013 is a win/win for this barometer as both the Baltimore Ravens and San Francisco 49rs franchises came from the NFL before the merger.
We jokingly went over the stats, but then had to get a little serious about how we’re actually positioning ourselves going forward:
Source:
Markets And The Super Bowl Indicator (WSJ)
by JC
When we look at the various asset classes, we want to ask ourselves where we’d rather be? Bonds? Stocks? Commodities?
Today’s chart of the day has to be the S&P500 vs CRB Index. To me, it looks like we’re at a critical level of resistance where (for now) it appears that the smarter direction to lean is towards commodities.
We’ll let prices guide us from here of course. A big piece of the $CRB index is in Oil. So let’s keep that in mind. Also, a bunch of these Ags have started to look attractive, so it makes sense to us. Meanwhile, the Transports, Small-caps and Mid-caps that led Stocks higher over the last few months have been diverging negatively vs the S&P500 and Dow Industrials.
Something to think about…
Related Posts:
Are Corn Prices Ready to Soar? (Jan 29th, 2013)
Metals vs Miners (Jan 24th, 2013)
Mid-Caps & Small-Caps at All-time highs (Jan 3rd, 2013)
Tags: $CRB $SPX $SPY $IYT $SPY $MDY $IWM $DJIA $DJP $DBA
by JC
If you’re going to be in the New York City area on Tuesday February 12th, I’ll be speaking at the Market Technicians Association New York Chapter Meeting at 5:30 that night. There is no cost to attend and anyone interested in technical analysis is welcome to come.
For those who don’t know, the MTA holds monthly meetings around the world and invites a different guest speaker to each event. I’ve been going to these things for years and have learned so much watching some of the top technicians in the business get up there and share their wisdom with us. So it truly is an honor for me to be invited as the guest speaker.
During the presentation we’ll discuss Technical Analysis, of course, including some of our favorite strategies and setups. Then we’ll go over how we incorporate social media into our day to day activities. I think it should be fun and hopefully you’ll find some value in it.
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I’m really looking forward to it. Hope to see you there.
MTA Members can Register online
by JC
We’re watching these Corn futures very closely right here around 730. There’s a lot going on in this space and I think the daily chart for $ZC_F breaks it down nicely.
The first thing we notice is this giant symmetrical triangle that formed off the July lows and August highs. Prices in December were approaching the apex of these two converging trendlines and broke down pretty hard. The sell-off took prices below a rising 200 day moving average and down to last year’s former resistance. This level turned into new found support and Corn was able to recapture its 200 day Moving Average a couple of weeks ago.
The reason this chart is exciting is the fact that we’re back up towards this 5 month downtrend line and have been hanging out here for two weeks. This is now the 4th (5th?) attempt to breakout. And the catalyst that may allow for that may just be the false breakdown that took place between December & January.
The number to watch here has to 735. A solid close above that could set the stage for a nice move to the upside. Until we see that, I don’t think there’s anything to talk about. But when something like this sets up, we have to stalk it.
Meanwhile, we’re watching the Powershares DB Agriculture Fund $DBA. Corn represents over 12% of it. Last week this ETF briefly broke below January support, only to reverse much higher on Monday. This level also represents the 61.8% Fibonacci Retracement from the June-August move. This along with the bullish divergence in its Relative Strength Index confirms some of what we’re seeing from Corn. We were pointing to this on Stocktwits Monday:
Obviously a rollover in $DBA and/or lack of breakout in Corn above 735 and there’s no trade to be had here on the long side.
Tags: $ZC_F $CORN $DBA
by JC
As we watch the Germanys and Frances of the world break out to new highs, we wonder how some of the less developed countries are doing out there. Standard and Poors has an Emerging Europe Fund – $GUR with companies like Lukoil from Russia and Turkish Bank Garan. The concept is interesting but the chart is really what screams out.
We’re going on test #5 of this 44.5 – 45.5 level:
This is basically what Germany and France looked like in early December (see here). So it appears as though inevitably we should see a breakout. The question here is whether they’ve been lagging the others for good reason and will continue to do so? Or whether the emerging areas will be forced to play catch-up and begin to outperform?
Either way, it’s certainly an interesting chart pressing up against some important levels. This is something I don’t think we should ignore.
Tags: $GUR $EWG $EWQ $FEZ
by JC
There are a few things on my mind that I wanted to share with you guys. Nothing too crazy, just some thoughts from this week.
A big question that I think we need to ask ourselves is what would surprise us the most. In other words, what is it that could happen to this market (stocks or otherwise) that would catch me completely off guard. What’s the last thing that I would expect to happen this year, so I can prepare myself for such an occurrence. Right now I think it would have to be a stock market crash. I just don’t see that in the cards at this moment, and I would be really surprised if we saw more than a 20% correction. So I’m committed to mentally preparing myself for that possibility. What are you so sure of right now, that you might just be wrong about?
Let’s talk about Coal. Man I’ve been stalking these guys for months and not a single breakout to speak of. This space has been really disappointing (see here). A lot of the names have a solid base and plenty of potential, but they haven’t done anything. There are are two possibilities here; either the bases are bigger, and therefore we should get an even bigger eventual breakout. Or, if the stock market rolls over without these guys doing a thing, guess who’s going to get smoked the worst on the way down? These guys. Something to keep in mind.
Speaking of big bases, how about those Transports? Let this be a lesson to all of us. THE BIGGER THE BASE, THE HIGHER IN SPACE. We say this all the time. But we’re seeing this one take place in real time. Here were my thoughts on it in November. When something bases for that long, the resolution is extremely powerful. It has happened before and will happen again. We can’t ignore this stuff.
I went to the Rangers/Bruins game on Wednesday and had to miss my Hurricanes destroy Duke. Two things I learned that night. When you tivo a big game like that, make sure you turn your phone off because all of your friends will ruin it and give you the results (especially if it’s the outcome you want). And two, that guy Zdeno Chara for Boston just might be the biggest human being I’ve ever seen on skates. I grew up in Miami where there isn’t much (any) Hockey, but I do know that he is one scary dude.
And what about the Yen? This is the epitome of markets staying irrational longer than we can stay solvent. Here’s what I’m thinking. I think the long Yen trade will come simultaneously with the short US Equities trade. There have been some strong negative correlations here in the past and I think we could see it again. Ive had a 92 target for $USDJPY, but we could easily see it go further. Watch a turn on this one as a possible tell. The Nikkei keeps ripping and appears to be headed to 11400. Again, just my target and could go further, but a level to watch nonetheless.
I wanted to take this time to give kudos to Mr. Market. Remember, its #1 job is to frustrate as many participants as possible. For some time (too long?), the market was rewarding people for blindly throwing money at $AAPL. In just a few months, the stock has given back almost 40% of it’s value. Poof, it’s gone. It goes to show you that the market doesn’t care about your product(s) or how much cash you have on the books. As it shouldn’t. The market is here to punish you if you’re being lazy. And those that rode apple all the way down with no risk management in place have no one to blame but themselves. It’s Real Estate in 06, Financials in ’08. And I promise you that we will see it happen again in another space. And then again. And then again.
This takes me back to my first point. Asking the question about what would surprise you the most? I think for a lot of us last summer, it would have been that come January, the Stock Market would be at all-time, or 52-week highs depending on your Index of choice, while $AAPL was chilling on the 52-week low list. I may have been bearish Apple, but I did not see this massive dislocation coming. Kudos to the market once again for making us look like fools for thinking that Apple and the Stock Market would remain so positively correlated.
Speaking of fools, how foolish are all those NFL teams for passing on Colin Kaepernick. Is this kid fun to watch or what? And big time props have to go out to Jim Harbaugh for benching Alex Smith, who was having a terrific year, to put in young Kaepernick. That had to take a lot of guts. Good for him and good luck to both of them next Sunday.
What about Bonds? Everyone is waiting for this turn in the Bond market, a secular turn nonetheless. We’re talking about a 30 year bull market folks. This turn is not an event, it’s a process. It’s going to take time. Trust me, when it turns, you’ll know. I think the risk here is that yields see 1%, not 4%. Just a thought, but everyone is waiting for this turn. Everyone is trying to short bonds (including myself). And listen, there will be and have been some awesome short Treasuries trades. But as far as the secular Bull market being over? Don’t fight the fed, let it happen. It’s a secular shift, not cyclical, so you’ll have plenty of time to participate. But it will come when you least expect it, not as everyone is waiting for it.
Finally, my last thoughts are on the market of stocks that we all get to participate in again. It’s been a cliche for a long time that this is a “market of stocks” and not a stock market. But we had lost that for a while with those ultrahigh correlations. Isn’t it nice that we get a soaring Netflix and RIMM, with Coals doing nothing, Apple getting destroyed, and Financials making new relative highs? There are places to be and places to stay away from again. It seemed like for a while that would never happen again. It was that whole risk-on, risk-off nonsense. We laugh about it now, but a few years ago if you wanted to know how your Microsoft stock was doing, or your Oil long, you had to look at the Euro. What a joke. Happy to be back in a fun market again.
Have a good weekend everybody!
Tags: $KOL $RIMM $NFLX $XLE $EWJ $IYT $DJT