Market-Technicals

New firm...

2009-11-06T09:34:00.002-05:00

I have moved over to a new group that is offering trading ideas and research to institutions.

Harrington Street Advisors has outperformed the market and offers buy side traders, portfolio managers, and others a unqie research offering.

Should you be interested in what we do, please see us at www.harringtonstreetadvisors.com

Sector Review

2009-06-10T11:33:00.004-04:00

CONSUMER DISCRETIONARY

HEALTHCARE

UTILITIES

CONSUMER STAPLES

TECHNOLOGY

INSURANCE

FINANCIALS

ENERGY

BASIC MATERIALS

SPX, Dollar Index, 10 Year Yield, Gold & Silver

2009-06-10T09:46:00.004-04:00

SPX: We have rallied from the lows, but is there real volume at these levels to justify higher prices? We are touching a major resistance level, hitting the lower level of the bearish channel formed in '07-'08. Caution here is needed!

Dollar Index: Double top formed, look for a slight rise then further weakness. RSI and MACD still look weak.

10 Year Yield: Look for higher rates in the near term. Speculation gov't might have to hike rates in order to stem inflationary pressures. RSI and MACD showing strong confirmation that higher rates are in store.
GOLD: Slight pullback then head higher.

SILVER: Price broke out of a pattern on volume confirmed some buying (See oval area). Look for higher prices from here.

ITT - Short Idea

2009-05-21T15:35:00.003-04:00

ITT Corp. is breaking through another bearish wedge. Once can see that after the first wedge (Nov'08-Jan'09) had been broken, we saw a significant downturn. I expect the same here, with a first target to be set at 32.50 followed by 32. Confirming this view, the RSI is showing a bearish divergence and has broken through an upward support line. Also, the upper Bollinger Band is showing a flat line in some areas, suggesting major resistance.

Ideas

2009-05-21T14:40:00.004-04:00

Above is are examples of my recent ideas. I haven't had time to post the charts, but should anyone need them, send me your contact information and I can send them to you.

I am also SHORT:

TMO @ 35.815
GILD @ 44.68

LONG:

GLD @ 92.215

PF Changs

2009-05-21T14:29:00.003-04:00

PF Changs is SHORT idea that I came up with in the last couple of days, but haven't posted yet.

As shown on the chart, I expect the rice to fall down to the 200 day moving around the 22.50ish level mainly due to a break lower from the recent upward trending channel.

Stop/loss would be a break of the lower trend line of that channel.

Biotech & Healthcare Equipment heading lower?

2009-03-26T20:01:00.006-04:00

Biotech and Healthcare Equipment groups might be in for a hard landing. Price action on a number of biotechs as well as some other names do not look good and are prime for some shorting. The key right now is watching the SPX at 840ish level. Resistance at this level and we head lower.

Healthcare Equipment:

MDT (Medtronic Inc.)

COV (Covidien Ltd.)

BAX (Baxter International)

ZMH (Zimmer Holdings)

BCR (CR Bard)

Biotech:

AMGN (AmgenInc.)

GILD (Gilead Sciences)

CELG (Celgene Corp.)

SPX Update 3/17/09

2009-03-17T19:56:00.003-04:00

Regarding the SPX, the recent rally has almost reached a key resistance level just shy of 800. This resistance area should be part of a downward channel, thus a retest of lows or even further low, which is more likely. While there has been some promising news on the economic front and some earnings calls, there is still a lot of "shoe dropping" to be seen. For one thing, there are many BKs within the commercial REITs space and others.

To be safe, a stop/loss level of 800 should be considered, but I do not think there will be a rally much further than that. Some sideways action beyond the 800 level, and a slight dip in the coming months would suggest a Reverse Head and Shoulders pattern having been formed.

New Ideas for a changing consumer...

2009-03-11T15:50:00.005-04:00

Hello All... Sorry I have not been posting for awhile. I was busy speaking with some funds regarding my potential to work with them using my ideas and strategy. If anyone out there is interested, I would love to sit down with you and chat about my ideas and performance.

OK, we have had quite a start to 2009. The bearish sentiment has there, yet I think the markets will continue to slide, as the caution and concern about the consumer has only just started. While we hear week after week about job losses, the deflationary environment will only continue to grow. Each new segment of what is happening, whether it is home foreclosures, jobs, consumer spending, corporate earnings.. these things are all food for one another and are propelling the economy into a tailspin.

Here are a few ideas I see out there today:

Auto Nation (AN) is looking potentially good here for a few reasons. Potential Reverse Head and Shoulders pattern, although it is near the peak of a bearish channel. I like this simply for the fact that that while fewer new cars are being purchased, consumers will look for other ways to maintain cars. AutoZone would be another one to watch.
Spot Gold is also looking attractive down here. The rise above the broadening pattern in 2009, and subsequent new support should be a clear buy signal.

CVS looks badly oriented, as a recent break in a bearish wedge pattern should call for further downside. Not sure how many consumers out there will end up buying purchases from their stores, so it could be a redundancy out there given that people will pick up what they usually buy at CVS at the supermarket.

Will the consumer go out to eat more often? Not sure, as DRI is about to head lower.

Gamestop (GME)... are people buying more games? I think a potential 25-50% haircut is in the offering here....

Also, I see some other names that look weak.... namely, WRC....

and ROP....

Goldcorp (GG)

2009-01-20T21:17:00.002-05:00

Following previous posts regarding the potential for Gold to outperform in 2009, Goldcorp is shaping up for a nice short term rally. In order to play this in the very short term, I am looking for the price to rise to 30.31 and 32.21 as the RSI is showing some strength. A stop/loss at 23.40 (roughly the short term trend line) would be advisable to cut risk.

In the medium term, a break of 33.54 would call for more upside. Potential targets can be set at 37.10 and 40.88.

Walmart...

2009-01-12T13:08:00.002-05:00

Walmart has signaled last week that earnings will not be great. Today, the company also mentioned that they do not see any turnaround in the US economy any time soon.

Regarding the chart above, the pricing in the short term was hit based on the earnings outlook. This has in effect validated a bearish flag pattern. A good entry price for a short would be between 51.90 and 53, with targets levels set at 47.20 and 44.78. Stop loss would be at 54.

XOM and CVX

2009-01-10T13:06:00.002-05:00

This past week, Chevron mentioned that its profit outlook is looking on the downside, as gasoline prices and energy demand has weakened. There are also reports and research pieces out there stating that the major oil players have enough cash on hand to buyout others, thus increasing their market share. CVX and XOM look like they have potential on the downside.

SPX Update

2009-01-10T12:05:00.003-05:00

Where do we go? Are we at a classical juncture called a "bull trap" (where people think the market is so oversold that buying anything seems like a sure thing, only to get caught holding the bag with huge downside in sight)? Or maybe we will rally, given the bullish divergence on the RSI, yet we will still be capped by a the large down move in 2008, around 1042 level.

Time will only tell...

What are we waiting for? Gold?

2009-01-09T23:21:00.005-05:00

I am still bullish on Gold for numerous reasons. First off, technicals still look great! Recent price action in gold suggests we are potentially looking for higher prices in the near future. A break of the 898 and 915 levels will produce a big buy signal. For a short term safe play, 932 and 982.50 would be good target levels. In the medium term, I would look for a break of the 1020 mark.

Also, I do not see any significant follow through in this rally to justify buying for the medium term. I think smart money is waiting for a few things:

Obama to take office...
Size of Obama's stimulus package
Fundamentals still are not there.... We will see more downside with deflation upon us. With people trying to justify the S&P 500 earnings trading at 15 times earnings.. I still do not think we are in calm waters. For one thing, credit markets are STILL FROZEN!
Some sort of transparency on the Treasuries Books. Bloomberg, Reuters, CNBC.. and others have tried to get access to this stuff.. but have been denied by the feds. Not sure if they are waiting for the new Administration to take over to provide some direction with the TARP, but we are currently looking at over 50% of GDP being used for a bailout. What is the Government holding? How long will the rest of the world finance this (through bond purchases)?

We are going to see a few quarters of really rough numbers from both the corporate earnings side as well as the economic side. The key thing to watch here is how the market reacts to the numbers. So far, not too good. Yet now is not really a good gauge to test market reaction, as everyone is waiting for Obama to provide some guidance.

While I am not posting every idea I have on this blog... I have seen some pretty interesting opportunities present themselves. Good luck and keep an eye out for the patterns!

CSCO

2008-12-30T11:17:00.003-05:00

There is some chatter around that CSCO might be moving into the home electronics side of the business. While it is the end of the year, I am cautious of entering into positions before the new year, so it might be worth watching this one.

In the short term, the price has broken through a small bearish channel. It has been slowly pulling back, yet has found support at the previous resistance level of the bearish channel. POTENTIAL for a short term Head & Shoulders pattern to be forming, as with MANY other stocks out there. If you buy today, tomorrow, or Friday (best bet), look for target levels around 19.10-19.30, followed by 20.50. Stop loss would be a break of the new support level @ 15.47.

SPX

2008-12-17T15:38:00.004-05:00

The market is at an interesting crossroad. There are two potential Short Term (ST) scenarios that can develop. Currently, the SPX is in a bearish channel, as the market deteriorated since September. We are currently testing the upper resistance level of this channel. A break above this level would lead to a rise to a resistance area (1054)created by the bearish channel from earlier this year. Failure to break above this ST resistance area would lead way towards a new low, around 700.

Given yesterday's Fed move, the following rally, and today's reaction, I think we may head lower rather than breaking out. Again, it is the end of the year, and also a new beginning in 2009, so it will be interesting to see where we head in the meantime. Remember, we have a lot of problems still in the economy, which still has yet to see some clear signs of the clouds clearing.

ROST and URBN

2008-12-16T20:05:00.002-05:00

While the market rallied today, there are some very interesting opportunities out there. Reverse Head and Shoulders pattern are abound. The SPX seems to be breaking through a short term resistance level and should head higher, yet will be capped by a Midterm (MT) resistance level.

Regarding the 2 charts above, URBN looks like it might have potential to rise above the descending wedge pattern, partially confirmed by bullish divergences on the RSI and MACD. Breakout of the upper resistance level of the recent bearish channel (20.69) would suggest prices might rise to 22.75 and 24.55.

On ROST, the recent break above the prior resistance level, set in place since early Sept. 2008, suggests that price might reach 31.50, followed by an area between 33.40 and 34.

ABX

2008-12-12T09:48:00.003-05:00

In the short term, ABX has been ranging in a downward channel since July of 2008. It has since broken out of this range. Also, there is a slight Head & Shoulders bottom forming, confirming an up move. Potential for the price to head higher towards 33.60, 35.75 and 40.60. Stop/loss would be a break of the old resistance/new support level at 27.25 ish level.

GLD

2008-12-10T13:54:00.003-05:00

There has been recent speculation as to the future direction and economic significance on the price of gold. Basically, there was a "backwardation" in the futures price that lasted about 48 hours. Since then it has been in a "normal state". Given that we are in the bearish market and everything seems to be hinting to disaster, or so people think, the speculation that backwardation has upon the currency market and governments is indeed dangerous. However, there are others out there that say that this backwardation is nothing to be alarmed about and could be explained in other manners, such as the failure of banks that trade in gold, counter party risk, "hoarding of money", etc.

With the end of the year upon us and to keep the risk and book clean, I would suggest a long opportunity in gold in the short term. Over the last couple of months, GLD has been in a bearish channel, yet has reached a strong support area situated around 68.30 - 68.70 (highs between Feb - April of 2007). RSI is posting a bullish divergence. Expect the price to trade toward the top end of the bearish channel, 86.40. I would use a very short term stop loss at 78.50.

Comcast losing the war?

2008-12-09T17:17:00.004-05:00

Comcast (CSCSA) has broken a multi-year support level around the 17.50 level. Most recently, the short interest has risen drastically, by over 80%. Roughly 43 Million shares have been shorted in the month of November, to 96 Million.

Expect prices to reach the lower level of the downward bearish channel around 11.97 at first. Given the Short Interest, I would think that there is even further downside expected.

I'm back....

2008-11-30T19:45:00.001-05:00

After a while of being in the game, I have returned.

Due to these great market conditions, I am looking for an opportunity to generate ALPHA and trade ideas at a buy side insitution. I see that my viewers span from the individual user, to those at JP Morgan and Credit Suisse, so if anyone would like to speak with me, they can email me at the link in the sidebar.

With that said, I would like to continue to providing you with my insight into the markets and politics.

I have moved!

2007-07-23T11:58:00.001-04:00

Hello All,

While trying to provide you with great trading ideas, I am currently working for Trading Central. This company is a leading provider of Technical Analysis for equities, FX, Fixed Income, and Commodities. Please visit the website www.tradingcentral.com to get a better idea of this fascinating and revolutionary approach to TA.

If you have any questions, please contact me @ shawn.carpenter@tradingcentral.com

Short play for the market?

2007-05-17T14:48:00.000-04:00

With leading economic indicators suggesting a slowdown in the US economy is looking upon us, it might be worth some interest to start looking at alternatives. While looking to short involves upside risk exposure, and metals are on fire right now, there is one option that many people may not have gotten their hands on yet. ProShares Short S&P 500 ETF (SH) is a great option for people to get some exposure to a downward move in the market. Buying the SH will enable you to purchase a basket of shorted companies and should prove to bring in some alpha to your portfolio. Take a look at the chart of SH above. You will notice that SH has been in a long downtrend for the last year and half. While the market has been rallying, this ETF has been really hit with bad performance. Yet, I believe that should market conditions deteriorate, SH should begin to rally. Prices remain cheap and seem to be supported by the 59.17 -59.35 level. If the market does indeed to start selling off, more market participants will be searching for ways to increase profits while trying to stave off risk. SH should be able to get more attention if this occurs.

WCI Communities Inc.

2007-03-26T10:22:00.000-04:00

WCI Communities Inc. is looking prime for a pullback. As the home builders face huge amounts of pressure with the SubPrime loan dilemma, we should see prices sag as the mortgage and home builder environment feels the pain. One can see from the chart above that resistance is evident around the 23.00-23.15 level. Any rally would be a prime opportunity to sell short. For support/buyback levels, we can see that a price gap has occured from 20.25 to 21.69. Closing out positions in this levle would be suggested. Letting profits run to about 20.00 or 18.75 level would be acceptable as well. Good luck!

Downward Spiral Ahead?

2007-03-13T13:59:00.001-04:00

The markets have been in a state of shock since the lastest selloff from a couple of weeks ago. We have seen most sectors and groups get hit pretty hard recently and the future doesn't look well at all.

Take a look at the SPYs chart above. The recent downturn has caused a waterfall effect in that everyone is taking profits since from the multi-year rally. It has caused much capitulation that the SPY broke major support levels, mainly Trend B (sea green trend line above). One of the most important aspects of this downturn is the white box. Price action has driven to data points below the lower Bollinger Band! This is important for the future of the markets because it signifies that there is lower prices ahead. More recently (in the yellow oval), you will see that the price has seen a resistance level. I believe this is the point at which either slow money is still unloading positions and more importantly, smart money is shorting.

With this said, you will notice a white trend line around the 130-131 level. This is the next major support level for a longer term perspective of where the market is headed. But before we hit that level, it will be interesting to see how the market reacts around the 132.77 level , a resistance level of May 8-9, 2006.

Have we hit the top?

2007-02-09T13:48:00.000-05:00

Hello all..
I have been busy on projects for the last couple of weeks, so I apologize for not posting sooner.

I just have one thing to point out, which could be pretty significant. As I am sitting here, I have noticed that the SPYs are getting smacked!!!

Take a look at the chart above. Todays high is close to the major resistance level noted as Trend C on the chart. The high of 146.19 was close to the resistance level of 146.37. As soon as the Spiders came close to this level, there was a rather large selloff. Currently the SPYs are at 143.87, over a large 2 point downturn. Be careful for more downward pressure as the pricing pattern becomes clearer to the rest of the street. A support level near 142.08 would be our next stop. Also watch for GSS and the price of gold/metals to post gains on the session as a possible safehaven.

2 plays in Gold

2007-01-25T08:30:00.000-05:00

Here are two ideas that I have been watching as of lately. GSS and BGO are looking prime for upside momentum. As each one is not a major player in this space, I am looking to see if these two companies might be ripe for a buyout from some of the larger names. The possible breakout points can be seen on each chart as 1/22 prices have traded above the recent downward resistance level. I am more attracted to GSS as the larger formation seems to suggest that the price has consolidated at the 3.80 to 2.40 level. With metals trending higher, I suspect these two to follow suit.

What is going on in '07

2007-01-04T12:55:00.000-05:00

2007 is looking like a lackluster year so for. For one, the DJIA was up 112 points yesterday last time I looked in the morning and glided down negative territory by the close. Why is this happening when usually Jan. is always a great time to trade? Well, as the saying goes, "Blame it on the economy stupid". Recent economic numbers that have been released suggests that the economy is facing a slowdown. December's ISM number ( which came in @ 57.1, down from 58.9 in Nov.) suggests that while moderate growth seems to be sustainable at this current time, it is slightly weaker than it was for the past couple of months/years. Given that companies were posting great profits for the last few months, expect that number to soften. This means that forecasts for companies are being adjusted and it is making the presence known by the equity market heading lower. Also, to grab an idea of the economic softening that is going on, check tomorrow's employment numbers and future econ. #'s to gauge where the economy is going.

So where does this leave us? Well, stocks are setting up for a possible downtrend. Take a look at the very detailed SPY chart above. You will notice that the SPY has been in a long uptrend since the beginning of 2006. Resistance level A and Support level A was the channel that the SPY was in from 1/1/06 to about 5/1/06. The down trend in the middle of 2006 broke Support level A, but recovered it's strength, thus leading to Support level B. As the market gained momentum, it drove higher while still keeping up with Support level B. A small breakout from 9/06 till 11/06 provided us with a new support level, Support level C. This strong trend eventually broke the original uptrend Resistance level A, which possibly signaled a huge breakout. However, the market players knew of the impending economic weakness and the SPYs broke through the Support level C. As the SPYs continued to trend a little higher, it still did not break through the Support level C, suggesting bearish indications. Thus, a new resistance level, Resistance level B. Since 11/06, the SPYs have been trading in the Support level B and Resistance level B channel. In 2007, you can see that the trend has been broken, and now Resistance level A is the new support line. Future trading will test this level. A Fibonacci retracement line of the 7/06 to 12/06 rally would leave a 61.8 retracement to 135.48, followed by 133.087 (50%), and 130.68 (38.2%). Also notice that a bearish divergence in the RSI has also been lingering since early Dec. 2006. Money flow has also been negative since 12/06.

Considering all of this, we will have to see where the markets trend to. A break in the Resistance level A will lead to future SPY weakness, possible to the Fibonacci levels described above. HOWEVER, if prices remain above Resistance level A, we could see continued upside advancement

The Metals and other commodities on the other hand seem to be in a consolidation phase, with potential to trade higher. If you look at Gold and Silver these commodities have been consolidating since the rather large run up. More recent trading in the commodities have suggested that the resistance level from the retracements have been broken (look at the charts above). As prices haven't rallied yet, we might see some upward pricing action as the USD continues to slide. Also, if the prices of these commodities rise, look for this as further indication of inflationary pressures upon the economy and FED.

Everyone is getting coal for Xmas

2006-11-30T15:37:00.000-05:00

Everyone has been put on the naughty list....

And if so, you might make some $$$$

The energy sector has been putting up some good numbers as the price of oil rises of it's pullback from this summer's highs. Looking deeper into the sector, coal has been outperforming the last couple of trading sessions. Take a look at the Coal Group. Recent declines in line with the price of oil has left this group in oversold territory. With the downward trend already panned out, we are starting to see a rally off of the lows. Fibonacci retracements suggests prices could rally up to 399.012 (38.2% retracement from the high), followed by 428.846 (50%), and 458.679 (61.8%).
The best play in the space would be Peabody Energy (BTU). Looking at the BTU above, it almost mimics the groups. Look for Fibonacci retracements to be at 49.26 (38.2%), followed by 53.95 (50%), and 58.65 (68.1%). While I have given the 68.1% retracement levels on both, the main focus of this play should be taken to the 50% retracement levels. Selling at these levels would be highly suggested.

Names also to consider in this group would be:
ACI - Arch Coal Inc.
YCZ - Yanzhou Coal Mining Company
MEE - Massey Energy Co.
ANR - Alpha Natural Resources Inc.

Industrials still the way go to....

2006-11-16T11:57:00.000-05:00

The S&P 500 Industrial Sector still seems like a safe play for this market. On the weekly chart above, you can notice the defined "cup and handle" formation that is a classic technical analysis formation which suggests higher prices are still to come. While this year has seen significant returns in this sector, it should provide more positive returns going forward.

Overall, the market seems to have given way to new highs in the DOW as well as a breached formation in the SPYs. The SPYs have broken it's upward trending channel that twas created over the last year or so. With the rally in the Spiders, coupled with early projections of a steady holiday shopping season, we might see the market trend higher.

However, there are still lingering issues that could derail this rally. Nuclear proliferation, a large US deficit, inverted yield curves, and an overall feeling that this market has been rallying for almost 3 years are still on the table with no clear indication of resolution. The recent Democrat Party win for the US Congress might also suggest where the market is headed once they come to grips of reality and what solutions they enact in this current political and economic environment.

Names to keep an eye on......

Personally I own REV.... possible contrarian play.. and it's only $1.59!!!
Silver and Gold mining companies.. RNO, PAAS, NTO have been in the portfolio with significant gains, possibility to add more down here.

PEIX!!! Looking good on the Alternative Fuel play.. Democrats could make a push for the country to shy away from foreign oil and thus would push more research and money into building a quality fossil fuel alternative industry.

Good Luck

Volume hints at the future

2006-10-24T11:04:00.000-04:00

Studying volume is a critical aspect of technical analysis. It gives insight into how a particular asset is being viewed to market participants, either buy more because it is cheap or buy less because it is high. This basic principle should be applied to market movements in determining if a security or asset is about to turn or reverse its trending course. While the Dow Jones Industrial Average is breaking all times highs, is this a real rally? Looking over my previous posts as well as the chart above, this market has NOT been defined as an all out bull rally in a traditional technical analysis approach. We need to dig deeper to understand what is going on here.

The chart above shows the S&P 500 ETF (SPY). Right off the bat, we can notice that in the last month or so of trading sessions, the price has been in a rally mode but it hasn't broken its upward trending resistance levels. Set in motion in the latter months of 2005, this upward trend channel has been in place while the DJIA has risen to all time highs. One would expect that a major rally would include the SPYs, as it tracks a higher concentration of the overall market (covers 500 stocks rather than the DJIA 30). Digging yet deeper, we can see that since 9/26/2006, the volume on the SPY has been lagging its own average. Look at the data below (data provided by REUTERS):

Not including today, we can see the SPY average volume for 14 out of the last 21 days has been below its 10 Day Average Volume. For the 30 Day Average Volume, 12 of the last 21 days has been below average. Noting this, we can say that this rally in the SPYs has been little about market participation and investment opportunity and more about reaction to the DJIA move. Furthermore, from the close of 9/24 till 10/23, the SPY has made a 6 point move higher. Of this 6 point move, the 7 days on which the market had more volume than its average, the gains were only 2.6 points. Please note the chart as these days are possibly signs that price action might close within the upper Bollinger Band. On the other side, gains on the other days in which volume was lower than its moving average were 3.4.

Lighter volume days are in essence pushing the market higher. When money is being put to work, the SPY is not making progress. To me, it seems as if there is shorting going on the days when more volume is prevalent. The sellers are not being very aggressive, rather just putting offers out there and getting filled.

As we also are in the mist of earnings season and a fed decision tomorrow, it will be interesting to see how the markets shape up in the near future. Boosting the economy is the fact that consumer spending might be bolstered by lower costs at the gas pumps, possibly making for a nice Christmas shopping season. However, while this may be all dandy, we still have no resolutions or clear insight into the Iranian and North Korean nuclear issues. While there are people out there saying that international issues are currently not hurting the markets, they are just trying to pull a blanket over the issue and let the market run. These are serious issues which will come back into the fray once they get down to the wire. Good luck to you all....

Revisiting the Bond ETFs

2006-10-19T12:28:00.000-04:00

Revisiting the Bond ETFs, we see some striking price action going on recently. In the charts above, IEF (Ishares Lehman 7-10 Yr. Treasury ETF) and TLT (Ishares Lehman Treasury 20+ year ETF) have both been in a downtrend since 2005. As the price action has declined, yields have strengthened; consistent with Fed rate hikes. While the equity market has seen recent gains mainly attributed to the Dow Jones Industrial Average leading the way, as well as positive (spotty) earnings reports, the overall sentiment of the markets has been in bullish mode. Yet, traditional Dow Theory followers will note that the Dow Jones Transportation has not reached its previous high set on May 10, 2006 and might not. Current equity market speculation has been supported DOW 12K hopes (which it did recently and sold off since). If this market was really a bull market, I would expect a HUGE short covering rally and an influx of money on the sidelines to propel the average (as well as SPX) up and beyond 12K. With regards to this, I am looking at the bond market to gauge if this is a true equity rally.

While the bond market has been a notable downtrend, we can see that recent price action could lend to the idea that gains in the equity realm might be put to work in the bond market. Given Fibonacci Arcs as a clue of a price reversal, we see that both ETFs have seen price action rise above the 28.3% retracement line in late September. While there needs to be more time to confirm if such a trend reversal should appear, look for price action to sustain above the yellow trendlines of both vehicles as a clue.

Middle East Battle for Oct-Nov???

2006-10-16T15:15:00.000-04:00

The winds of war are silent in the media, but they are out there.

Iran has just declared war against Israel and the US. It wasn't that long ago when a man named Osama bin Laden and the Al-Qaeda organization declared the same proclamation against us.

The US is gearing up for a war games with other Middle Eastern allies scheduled to start at the end of October. The USS Eisenhower Carrier Strike Group is making its way to the Persian Gulf to participate in this matter. That would beef up an already US presence in the Gulf due to the war in Iraq. As this unfolds, it will be interesting to see what reaction Iran will take upon this mock military exercise. As Debka.com reports, Iran might be prepared to take this opportunity to strike out at the US (click on the title of this post to see the Debka.com article).

What will this mean for the markets? Well this all depends on whether or not Iran takes action. The Iranian nuclear situation has already been forwarded to the UN Security Council to decide the fate of this dilemma. Iran has repeatedly said in the past that this course of action would be detrimental to negotiations. Should Iran attack this US/Allied war games, I would suspect Oil to break out of this current range. Gold (see previous post) would also rally as a possible war would escalate into reality. The current equity market rally would be cut short and a defensive posture would be the norm among market players. In short, it would be prudent to play the "very short term" on SELECT equities given earnings season is still happening. Yet it would be very prudent to remain cautious as to the undertones of what might transpire in the near future.

Be careful out there, utilize strict risk management techniques, and be wise to take note of possible developing actions.

Gold as an alternative option

2006-10-16T12:28:00.000-04:00

The price of Gold has been consolidating from its high on 5/12/06. Coming from a high price of roughly $721.00, it has been sold down its current level of $598.00. This move of roughly 129 points, or a downward move of 17.7%. Considering this, you will see on the chart above that a support level of 560 to 576 has been sustained on the short term. Price action for Sept-Oct.'06 has remained in-line with the support level of June'06. While the Dow Jones Industrial Average has taken off, leaving a bearish divergence from the traditional Dow Theory, one might take some caution here and place some safe bets on Gold. Also, considering that the international political arena is rife with tensions from North Korea and Iran, gold might be an option for people to put recently gained equity profits to work in the near future.

The oscillators also tell of some interesting signals. The RSI for gold is turning upward and might break the downward bias it has been on since May-June'06. The coming days/weeks will confirm if a gold rally is evident. The Chaiken oscillator is also suggesting that money has been moving into gold at these levels. The channel in the Chaiken oscillator pointed out in the chart above might suggest that the sell off might end soon and buyers might be coming back into the fray. Yet again, the coming price action and technicals must be followed in the coming days/weeks to confirm this bullish trend reversal.

It might be wise to buy some of the underlying companies with in this sector as well, before the street begins to see this turn of events. Some names to look out for would be:

NTO - Northern Orion Resources Inc.
AEM - Agnico Eagle Mines Ltd.
ABX - Barrick Gold Corp.
PAAS - Pan American Silver Corp.
RNO - Rio Narcea Gold Mines Inc.
SA - Seabridge Gold Inc.
VGZ - Vista Gold Corp.
OZN - OreZone Res. Inc.

Bonds ETFs...

2006-09-19T21:07:00.000-04:00

The market seems a little top heavy. Since my last post, the SPY's and DIA's have made little gains, despite increases in volume. This market seems as if it can't push past the recent highs set this past May. Even with "quadruple witching" this past Friday, the market has not sustained the momentum which it would need to burst to new highs. With bearish divergences in many sectors and indices, be careful on the equity side as there might be more room to the downside.

With this said, where do we look to find ALPHA. One area might be in the bond ETFs. Take a look at the iShares charts above. You will see that recent downtrends on all 3 charts might be reversing towards the upside. In the YELLOW OVALS, you will also notice a positive Chaiken oscillator and an RSI moving higher from it's months long decline. All of these signs are very bullish for these ETFs on a weekly basis. If the market looses steam as indicated by the technicals, money should be flowing into bonds as a safe haven and could increase in value. Also, increasingly signs of a softer landing in commodity prices, easing of interest rates by the Fed, and tensions abroad might lend to higher prices in bonds. While the Consumer Staples has had a nice price appreciation already (see past posts), this idea might be an interesting side-play to any equity short play being taken now.

Just to keep in mind..while purchasing the actual US treasuries might be wise, the ETFs offer a way to purchase this market while keeping money within your equity account. This might be a better way to trade this "move". If the equity market does rally, cash is more easily transferable to the equity long side.

Home Depot...

2006-08-29T14:50:00.000-04:00

Home Depot is looking really good right here. Price action has test support levels and it might bounce from here. Home Depot might find some legs given Hurricane Ernesto is approaching Florida as well as insurance checks being paid to New Orleans residents to rebuild. It will be interesting to see if the Home Depot can receive business of off these two issues. I currently feel that a Fibonacci retracement could lend future prices towards the $38.00 level.

The Spiders....

2006-08-16T11:10:00.000-04:00

The S&P 500 ETF is looking very nice!

While the whole market has dipped since last spring due to numerous factors, the current state of the Spider ETF is looking well. In the chart above, you will see the 10 year weekly chart of the contract. You will notice the yellow support line of the multi-year rally that has taken place from 2003 to the present. This recent correction in the markets still lands within the support lines of the longer term rally. This correction also fell to the support level of 40 on the RSI, a bullish signal. While this may be true, we must take into account that in order for this rally to be sustained, it must break through the resistance level (purple line- 133.09). This resistance level is a key level in that the previous bull rally will end and a new bear rally will ensue if this level is not broken. Levels at 132.09, 132.80, 133.09, should also be watched with interest.

Given that there are multiple concerns which could still affect the overall market, we should be looking at this resistance level over the next few weeks. Concerns about hurricane season, nuclear issues with Iran and North Korea, as well as the Middle East War with Israel and Hezbollah will still play an active role should any one of these issue flare.

Resistance levels of Natural Gas

2006-08-08T17:46:00.000-04:00

Natural Gas has been in a major downtrend since last year's bull rally. We can see that prices have topped out around $15.00 last year and then headed lower, consolidating around the $6-$7 level. Going forward, if a rally becomes evident, we can expect prices to rise to higher levels. Based on Fibonacci retracement levels, 8.921 (38.2%), 9.987 (50%), and 11.054 (61.8%) would be the resistance levels at which sales should occur. To back up a rally, we could see the CCI has broken through it's moving average (bullish), and RSI seems to be gaining a little ground.

Why would this market break out? As we just entered hurricane season which expects to bring a few storms that could do damage, the main emphasis would be another storm hitting the Gulf coast. This region is a hotbed for the natural gas market, pipelines, and refineries. As Hurricane Katrina damaged the reason, we saw prices of Natural Gas explode to the $15.00 level. Another one could have the same effect.

Also, keep any eye out on the inventory number which is due out this Thursday (tomorrow). The heat waves from the last couple of weeks should have an impact on the draw down from inventories. This would lead to price spikes and should rally the market. However, beware the fact that recent weather predictions for the nation have been modest for the next couple of weeks. This could give ample time to resupply the lost inventory, thus leading to lower than expected rally prices.

Light Sweet Crude.....

2006-08-02T10:48:00.000-04:00

Is the recent rally for Light Sweet Crude about to come to an end? While chart above might present a well defined bull run, recent price activity might suggest the short term of oil might be due for a pullback. Upon further study, you will notice that in the weeks of July 15 and July 22, the price of the oil closed within the Bollinger Bands. Common interpretation of this pattern suggests that prices at this level might be pricey.

Digging deeper, we see that the RSI oscillator is suggesting a bearish divergence from the July highs. This suggests that the strength of the July move has been weak. This classic pattern suggests that prices might be due for a break, possible weakness in the near term.

Finally, the Chaikin Oscillator is suggesting that the July spike might be overdone and furthermore, the bull rally might need a pullback. This oscillator identifies the relationship of the average price of the underlying asset with respect to the volume present at that time. In other words, it shows how much money is being put to work in a particular asset at a given price. A high Chaikin Oscillator suggest money is flowing into the asset. In this case, we again see the bearish divergence of the Chaikin Oscillator and the price of oil. The Head and Shoulders pattern might suggest that a pause, or pullback might be imminent.

While these technical aspects are very revealing, there are some cautions to be aware of. We are at the critical juncture of hurricane Season. With expectations of a strong season, it would be prudent to see that these technical indicators can be disproved with a hurricane that can disrupt areas of the economy. Also, Middle East tensions always play a part with the oil situation. As Aug 22nd nears, the world is going to look on the Iranian nuclear issue. A negative tone on this situation could always effect oil.

Biotechs...

2006-07-27T11:46:00.000-04:00

The S&P 500 Biotech industry looks like it is about to rally. Viewing the chart above, you will notice that the current price action is above the recent downward trend line from 2003 to 2005. The industry is also in a consistent upward rally since 2002. (BOTH YELLOW TREND LINES)

If corporate earnings remain solid in this group, testing the resistance levels (PURPLE LINES) will be the first test for the rally to continue. Look for the group to hit the 969.33 followed by 1012.71. Downside risk is 816.46 followed by 802.17.

As earnings season is in full swing, the market is reacting very positively on good earnings reports and fairly harshly on bad earnings reports. While this continues, expect the status quo. We still have a huge international issue going on in the Middle East. The Israel-Hezbollah War, Iran and Korean nuclear issue, and possible other fronts are all going to come back into the forefront once this earnings season is over.

Airlines....

2006-07-20T12:03:00.000-04:00

The S&P Airline Sector has been in a major slump for the last 2-3 years. For obvious reasons (including 9/11, reduced consumer flying, as well as carrier financials) the sector has seen stagnate money flow. Recent technical indicators might suggest something is about to happen. Take a look at the weekly chart above and you will notice that the sectors Bollinger Bands have been flat over the last couple of months, both on the top and bottom bands. This suggests that there is ample pressure from both the sellers and buyers. It is a tug of war to see who will win. Further analysis points to an increasing RSI. The latest dip in May-June has led to a bullish divergence. There has been strength in the downturn in question which is a major signal for a possible rally.

Some names to watch in this group are:

MAIR - MAIR Holdings Inc.
LUV - Southwest Airlines
MESA - MESA Air Group
XJT - ExpressJet Holdings Inc.

DIA and SPY

2006-07-18T08:46:00.000-04:00

Above are the weekly charts of the Diamonds (DIA) and Spiders (SPY). We can see right off the bat that support is being or about to be tested. With earnings season under full swing, and the international front still taking the front burner, it will be time to tell what these indices will do. While approaching support, buyers are still wary of what the short-term future holds for equities. Caution is the rule of thumb at this juncture. If prices break support levels, look for massive amounts of selling with pick up in short interest.

Also, higher temperatures across much of the US as well as heading in to Europe should push utilities higher. We are heading in to the dog days of summer and a international situation brewing. Remember, not only is the situation with Israel and Palestine happening, we also have the continued nuclear threat from Iran and North Korea. Do not expect these issues to be over anytime soon. Again, caution is the main idea here.

All is NOT well on the international front...

2006-07-12T15:50:00.000-04:00

The Middle East about to undergo major warfare if the current situation is not resolved shortly. And by the looks of it, nothing is done to abort this escalation. The Israeli and Palestinian confrontation is being forced into a major turning point in which a war would be the outcome. Considering the news from the last 2 weeks, ALL IS NOT WELL ON THE INTERNATIONAL FRONT.

Earnings play aside for now, the major focus of the global markets is reacting to the developments in North Korea, Iran, India, Israel, Palestine, Lebanon, and Syria. Major tensions are being played out between the Israelis and Palestinians, with a possible Iran connection (click on title of this post!). Debka.com is suggesting that Iran is trying to force a Middle East war scenario before going into the G8 Summit in Russia. If this plays out to be true, it only reinforces the speculation among the Western World that Iran is buying time to build nuclear weapons and will stop at nothing to get it done.

As this all plays out, political instability in the world is causing uncertainty in the markets. As the earning season is jut underway, look for this issue to put a hold on the markets for the next month or so. Commodities are starting to rally as all sectors have been down today. Gold and Oil charts above are hinting at pending rallies as they might break resistance levels.

Updated Utilities...

2006-07-11T15:12:00.000-04:00

Utilities are looking very good here.
As we see from the charts above, the group looks to be in a break out rally stage. Money is flowing into the group as international tensions still play a role on the global markets and the fact that the public seems to be lightening up on retail sales spending (more likely due to high gas prices). There is also the increased speculation of M&A activity within the group. As more and more cash comes into the group via PIPEs and mergers, it is bound to become evident that these investment seekers are looking for higher returns.

The IDU and XLU are showing great signs that the recent downtrends from this past spring have expired and are showing signs of bullish sentiment. Watch these groups if there is continued weakness on the international front, which is more than likely considering there have been train bombings in India (which could be from al-Qaida)

Some names that might catch your interest....

EXC - Exelon Corp.
AEP - American Electric Power Company Inc.
SJI - South Jersey Industries
EP - El Paso Corp.

Stagflation possibly contained?

2006-07-07T08:40:00.000-04:00

Take a good look at the economic numbers this morning and you'll see that one number has beat all the rest. The average earnings for workers in June rose .5%, a big jump from the expected .3% and even higher jump from the previous .1% in May. The market might be concerned with the Non-Farm payroll numbers (which is still higher than its previous reading), the earnings number is more important in that it might be a signal that stagflation is contained. While inflation issue still remains an issue, it is interesting to see that workers are being paid more to handle recent inflationary factors that are evident in the current economic situation our country faces.

Abundant news on 4th of July weekend...

2006-07-05T20:59:00.000-04:00

International issues rule the day!!

We have our plates full with international escalation issues that are effecting not only the US, but the rest of the world. First of all, we have the North Korean missile issue. While our main concern with N. Korea was the belief that they obtain the technology to deliver a missile that could land within the United States, it was short lived. Many missiles were launched, but the real one everyone was interested in only logged a mere 40 seconds of flight time. Bottomline... N. Korea has a long way to go before they could deliver a nuclear payload to the mainland US. Negotiations will be needed though in order to quell N. Korea from harming Japan, South Korea, and other neighbors.

Also, the tensions in Israel and Palestine continue to escalate. The tone of this situation resembles a war stance by both sides. This could escalate fear among the world as this might spread across the region.

With this said, the US market is holding steady. The biggest catalyst, barring any escalation in the international realm, will be the earnings season right around the corner. Right now, the S&P 500 is looking like earnings will grow by 9.7%, up from 9.5% last week. What does this mean? People are spending money and not affected by the high price of gasoline, even during the peak summer driving period. The Fed might continue to raise rates, yet the decline in the recent PPI number (July ex-food/energy was 1.66%, down from 2.83% a year ago) may give them more incentive to stall a hike in rates and give them more room down the road to react.

What does all this mean for the markets? Hold tight for now. The chart above is the SPY (S&P 500 ETF). Recent price action has hit the 50% retracement of the recent downtrend. A good earnings season, again barring any escalation on the international front, should provide a rally for the market and enable the multi-year rally to remain intact. A bad earnings season (possibly with poor forward guidance) coupled with possible escalation on the international front will spell bad news for the markets and should push money into treasuries, energy, commodities, or other sources of investment potential such as the Consumer Staples Sector (chart above).

Computer Hardware Group..

2006-06-28T12:43:00.000-04:00

The S&P Computer Hardware Group is on near support levels of its upward trending channel. If price movements in the underlying stocks (below) maintain these levels, we might possibly see this group head higher. Retracement lines suggest that if this occurs, the sector will move to 378.32 followed by 385.84 and 393.36. Relative Strength Index is near its support level and could point to sustained pricing action.

Names in this group and that should be monitored are:

IBM
HPQ
DELL
AAPL
SUNW
NCR
GTW

The Spiders.....

2006-06-22T10:18:00.000-04:00

The Spiders are at support!

Hitting the multi-year support level is a key level if this bull market is ready to advance. Price movement MUST stay above these levels or else a major downtrend is in the works. RSI and Stochastic oscillators are suggesting that this recent correction has run its course.

The only factors that will have an short-term affect upon the market would be the next Fed decision or the Iranian nuclear situation. If the Fed decides to increase rates or the Iranian situation boils up, the market will take a negative tone and possibly head lower. If the Fed pauses or the Iranian situation improves, look for the market to sustain the current levels or push higher. Either way, these are the only two effects that will push the market in either direction for the rest of the summer. Also, with earnings season right around the corner, it will be interesting to see if companies are still seeing a healthy amount of profits.

NYT and Short Interest

2006-06-19T16:22:00.000-04:00

The short interest in NYT is large. At a little over 11%, the short interest is the largest in the publishing group. Since 2004, the stock price for the New York Times has been in a significant downtrend and has not let up. As the chart above suggests, the downward move has led to over a 50% decline in the price. While fundamental numbers rule the show, I suspect that some of the short sellers would see a 50% profit as a windfall in the current market conditions and would not be surprised to see them cover. A 38.2% retacement would be $30-$32, while the 50% retracement be in the $34-35 range.

VIX and the Markets.....

2006-06-13T11:42:00.000-04:00

The VIX is making yearly highs since the markets are pulling back. As an inverse indicator of the market (more indicative of investor's fears during uncertain times), the VIX is reacting to the decline in equities following a multi-year rally. Watch for a major support level (24.02) to be tested in the near future.

Current state of the markets...

2006-06-08T11:00:00.000-04:00

The S&P 500 as well as the majority of other indices have seen a huge amount of selling in the recent weeks. While this has been expected, we are at a critical point in this market to determine if this is only a correction or if it is the start of a bear market. The S&P 500 chart above shows that recent price action is about to reach a major support level. Should this be only a market correction, we should touch this support area, consolidate and then move higher. If we breach this level, we should see further weakness in the financial markets and sector rotation into "safe havens" will only increase.

As ICI.org research indicates, $2.063 Trillion have been put on the sidelines on May 31st, $19 billion more than May 10th. As we move towards uncertain market conditions, it only makes sense that people start to move their money to "safe havens". If the technicals hold up, more short covering as well as money being put to work will be injected into the market. This will lead to a rally from this low, but it would require an additional test of breaking the low on April 17th.

The US is moving....

2006-06-01T20:52:00.000-04:00

Here is a little passage from Debka.com. Very interesting... Click on the title above to see full article.

"Three weeks ago, American emissaries began quietly visiting banks and financial institutions in West Europe and Asia. They showed the heads of these institutions lists of Iranian firms, industries and private tycoons associated in one way or another with Iran’s nuclear effort. They then indicated that American banking and corporate doors would slam shut against any financial bodies continuing to do business with the blacklisted Iranians. Our sources report that the Americans were pleasantly surprised by the success of this quiet campaign.

Many of the banking and financial bodies lobbied in this way were quick to cut their ties with the named Iranians, with immediate impact: A loud outcry arose in Tehran’s central bazaar where most business with foreigners is contracted." (debka.com)

Going to WAR!!!

2006-06-01T16:49:00.000-04:00

As I have continued saying, the international front is seeing a major policy objective being tested before the world community. While the United States and the western world continue to try and uphold the Nuclear Proliferation Treaty, Iran is trying to sink its teeth in the idea that it has a "right" to acquire nuclear weapons as "stated" in the treaty. The US made a smart move recently as US Secretary of State Condoleeza Rice suggested that the US will take part in negotiations IF Iran will discontinue and cease all uranium enrichment steps. IRAN BALKED!!! It pretty much told the world it doesn't care what they think and it will continue to seek its "gold".

As this is playing out before our eyes, we should think of what this might mean for the financial markets. The US is not going to "go-it-alone" on this one. If you don't think that we are consensus building right now, I am going to throw up! A build up is coming and this will put ALL MARKET PLAYERS ON THE DEFENSIVE! Coupled with talk that the economy is on the verge of a downtrend (again, you heard it here first), we will see more money flowing into "safe play" sectors and industries. The chart above shows the Staples sector about to rally.

To sum it up, Smart money knows that a international showdown is imminent. If Iran doesn't take the "carrots and sticks" concessions (click on title of this article to see what countries are saying) , we are heading towards a downward spiral...

Utilities?

2006-05-30T17:53:00.000-04:00

The S&P 500 Utilities Sector might break its current downtrend and head higher. The Fibonacci Arcs in the chart above show that it has recently retraced 50% of its downtrend in recent trading. While this is important, the higher low price pattern in the month of May is of more interest. It suggests that the trading pattern is moving away from a downtrend and might move higher. As the markets make monthly lows, a continuing international spectacle with Iran develops, consumer spending on the decline due to high gas prices, as well as heading into a summer season with increased hurricanes and storms; smart money might be moving some cash into this sector to be put to work.

Ford Motors...

2006-05-26T08:05:00.000-04:00

The Auto Sector should see some gains in the days and weeks ahead. Price movement based off of Fibonacci retracements lines of the downtrend suggest the retracements to be 80.20 (38.2%), followed by 85.52 (50%), 90.85 (61.8%), and 108.09 (100%).

Ford Motor company looks like it will be breaking its downtrend with recent price action suggesting that buyers are stepping up to the plate. In the chart above, we see that the yellow circles are points in which the price of Ford broke through the lower Bollinger Band, implying that the downtrend would continue. The green circle points out that the price closed above the lower Bollinger Band and has been confirmed by the May 23rd low. Also, the pinched Bollinger Bands suggest that a major price move is about to happen (either higher or lower). Given the pinched bands as well as confirmation on the low, I would expect Ford to start trading higher.

Durable goods decline....

2006-05-24T08:43:00.000-04:00

Today's durable good numbers were not good at all. Consumers are not purchasing durable products (such as TV's, freezers, airplanes...things that will last a long time) at a rate that they have been for the last couple of years. One can see that the rate of Durable Good sales has been stagnate, while durable good inventories are catching up to demand.

Seems as if consumers are being more cautious as to what they spend. This could be due to the fact that people are paying more at the pump. As I pulled up to the gas station the other day, I noticed the meter on the pump was $75.00 for the last sale that happened before I pulled up. Who is paying for these prices and tell me how that is not affecting discretionary spending across the board.

Retail Home Improvement industry

2006-05-16T20:50:00.000-04:00

The S&P 500 Retail Home Improvement chart above suggests names in this group are about to set up for a deep reversal. As you can see, the yellow line represents the home improvement retail sales number. Comparing this to the actual industry, we can see that the retail sales have been not excelling as some would hope it would. The names that comprise the retail home improvement index would be Home Depot (HD), Lowe's Corp. (LOW) and Sherwin Williams (SHW). Watch these stocks begin to decline as more consumers shift away from the housing market and spend their money on other things, such as gas going into the summer driving season!!!

Food Distributors..

2006-05-15T08:47:00.000-04:00

The S&P 500 Food Distributor industry seems to be finding support at these levels. Food, typically a haven for money during uncertain market conditions, should be receiving in-flows of capital as the market heads south. Names to watch and might be of interest include:

SYY - Sysco Corp.
UNFI - United Natural Foods
PFGC - Performance Food Group
NAFC - Nash Finch Co.

Hedging the downturn...

2006-05-14T19:45:00.000-04:00

The market is due for a correction since the multi-year rally has run its course. While this has began to surface as the market slid last week, we will see more selling as the weeks continue. A look above shows that the VIX index has just turned the key and will be firing all cylinders as the market goes down. Weekly, medium-term resistance levels are 15.37 and 23.62.

The SPY is looking at a major test this coming week. If we hold the 129.12, we might see a rebound. This is supported by the RSI reaching the adjusted lower level @ 45. Yet, considering the VIX chart and current market sentiment, we will probably see prices break down past these support levels.

Chemical Sector is rising...

2006-05-09T13:20:00.000-04:00

The S&P 500 Chemical Sector has brokern through resistance levels as of lately and is headed to new levels. As we can see from the chart above, the industry has broken out of its consolidation and is headed higher. Some names to look out for would be:

DD - DuPont El de Nemours
DOW - Dow Chemical Co.
PPG - PPG Industries Inc.
Ash - Ashland Inc.
EMN - Eastman Chemical Co.
EC - Englehard Corp.
HPC - Hercules Inc.

Also, we have seen a significant rise in commodities (see my forecast on the price of gold from past posts) which can affect the Feds judgement on inflation in their next meeting. While there has been some research pointing that the amount of money spent on natrual resources has decreased gradually per household, I still believe that this current spate of oil price upon the consumer will tend to spill over into consumer spending going forward.

The VIX points to market decline...

2006-05-03T14:17:00.000-04:00

The VIX, a common index used to gauge how much volatility or risk there is in the market, seems to be implying an upward move. After downtrending since the multi-year long rally, there seems to be suggestions that the index is in a consolidation phase. The VIX is read as being on the opposite side of the market, such as a inverse reactor to the actual market. This means that as the VIX slides, investors are at ease with the current market conditions. As the market becomes weak or retraces, the VIX moves higher. At this point in time, we can say that the market is gearing up for a reversal.

In the above chart, we can see the wedge pattern that is forming on the VIX. Volatility in the total markets put vs call ratio suggests that investors are feeling worried. Maybe the Iran situation, price of gas at the pump, or an end to the multi-year rally is causing smart money to place bets against a move higher.

The real pain of high gas...

2006-04-23T13:43:00.000-04:00

The national average of retail gas prices have climbed to $2.90 ( as of 4/23/06, according to AAA, http://www.fuelgaugereport.com/index.asp ). This is up from last month's average of $2.509. As these prices climb and as people continue to use cars as they used to, money that has been driving this multi-year bull run in the markets will go into the pockets of oil companies rather than the broader sectors of the market. It will be interesting to see Q2'06 corporate earnings, mainly their guidance going forward as well as possible early warnings of missing estimates.

CNBC Stock Game...

2006-04-19T21:51:00.000-04:00

Commodities are going through the roof!!!

I am still bullish on Gold.. and it's almost half way there. I am looking for a price of $700.00. Considering the red hot sector of the market, we might just get there.

Anyways, sorry for not imforming you all on my recent pickings of the CNBC stock market game, but I've been very busy with other things. I am currently in the top 5% of all players!!! Had a great pick on ICE which went through the roof. Up 10 points on 10k shares.

SPX as of 4/18/06

2006-04-18T15:06:00.000-04:00

The S&P 500 index seems to be doing well today. Yet it seems to be nearing resistance. As you can see from the chart above, the 14 day RSI is showing a bearish divergence from its price movement over the last couple of weeks. You can see the orange line pointing to the point at which the RSI failed to break the recent point a few weeks ago. The orange line at the price of the SPX failed to break the 1310 level. Look for more resistance as commodities make new yearly highs.

Money Market Flows

2006-04-10T07:59:00.000-04:00

Recent money management values are suggesting that money is not being put to work in equities. Around $21 billion has been moved into money market accounts in the past 4 weeks,according to a report from Investment Company Institute. (Double click on the title of this post to see the actual data from the ICI.org webpage.)

Amount of fund in money market account for the week ending:

3/15/06 - $2.04 Trillion
3/22/06 - $2.056 Trillion
3/29/06 - $2.056 Trillion
4/05/06 - $2.061 Trillion

What does this mean? It means that the lagging money managers have realized the dire shape of the current economy and financial markets. By placing money into money-market funds, they are buying tickets on the sidelines of this game and will watch to see what the next play is. More money coming into these accounts will only confirm the current bearish sentiment that the markets are going through.

YRC Worldwide and the Transportation industry...

2006-03-23T11:18:00.000-05:00

YRC Worldwide came out with their earnings today and it was a disappointment. In their 8K released today, they cited lower volume in shipping client orders and competition as reasons for the downward guidance. What is very important note here is that YRC Worldwide's CEO said that their clients have made dramatic changes to their inventories. Hint hint... Retail companies aren't seeing the demand for their goods! Why would they stock more inventory when the people are not buying the goods. Could this be an early detection that the American consumer is done buying discretionary goods. Even though the most recent home sales for Feb are above expectations, is it now a concern that people will stop purchasing items due to less mortgage refinancing? Time will only tell and stories like this will have to be more consistent. Yet the warning signs are there....

Producer Price Index.....

2006-03-21T09:23:00.000-05:00

Hello all,
Been busy but I'm back. Today the PPI number was released and it is suggesting that producers are able to produce goods at a fairly cheaper rate than the last time it was reported. This is full PPI number. Yet, most smart people on Wall St. focus on the core number. Excluding food and energy, the number was .1 percent better month over month and .2 worse year of year. Though most people perdicted a .1% PPI number, the actually PPI core number came in at .3 compared to .4 last month (returning to the status quo of inflationary concerns).

What does this mean? It means that the long term trend is still intact concerning the inflation and its affects upon the well being of our national economy. Yet, I would like to see how the PPI (not the core PPI) came in a lot better than it did. If this is a sign of weakening inflationary pressure for the short-term, some of the ideas that pop into my head are:

1) While the markets might react very positive to the PPI number, we must see a consistent improvement in the PPI number as well as CPI number to confirm that inflationary trends are not causing issues for the economy.

2) If this trend continues, corporate earnings might be adjusted to the upside. Why? Because we can assume that if the CPI number remains at it's current level and PPI is continuing to come down, companies are producing cheaper goods while making a nice profit selling their goods.

3) We must see how the Fed will react considering these numbers. Bernanke spoke last night in NY and described that the US Fed policy should reflect more of the stimuli coming from the global landscape rather than an internal reflection. What does this mean? Bernanke is guiding the economy to be flexible and adapt more to the emerging and interdependent global marketplace.

While I am still a believer that this market might turn to the downside in the short-term, I will be watching how these numbers will affect the market. It might just be a determining factor for the bulls to justify a rally. If this rally does happen, be prepared to see short interest covering go into full swing. But only time will tell and I feel that we must trend a little lower after a 3 year rally to really break out to the upside...

Politics make up the day...

2006-03-08T19:30:00.000-05:00

There have been many developments on the international political spectrum today... and the market finished higher?!?!

Mudslinging was in full force today as Iran responded to the West's action on referring the case to the United Nations Security Council. Iran stated that the West, and in particular the US, would face "harm and pain" upon requesting the IAEA case be brought to the UN for possible sanctions. The US is suggesting that Iran has enough highly enriched uranium gas that could be developed into 10 nuclear warheads. Iran is keeping to its story of nuclear fuel for peaceful, electrical purposes. The IAEA suggests that if Iran doesn't comply with reinstating inspection standards within 30 days, then the case will be moved to the UN. Also, Israel said that if the UN is not successful in deterring Iran, they will move unilaterally to protect its citizens.

What to make of all this? Well, this definitely does not look good for the markets in the short-medium term. Although the market did end higher today, the political situation should be at the fore-front of "smart money" thinking.

Consumer Staple Sector rally is possible

2006-03-07T15:42:00.000-05:00

The Consumer Staples Sector is in a prime situation to capitalize on a market downturn. Usually, this sector is a safehaven for smart money when the market is headed lower. As we can see from this chart above, the sector is in a tight trading range and might rally if conditions permit such a move. An inverted yield curve, slowing productivity, and geopolitical concerns are driving forces for the possible scenario.

As you view the chart, you will see the white lines which are indicated as Fibonacci Time Zones (FTZ). FTZ's are an valuable tool to gage market timing and patterns. It follows the principle set forth by Leonaardo Fibonacci, recognizing the fact that there is a proportional sequence of numbers in nature as well as in finance. More of this topic can be found at investopedia in the link section to the right.

At each line or zone, we can see that the underlying vehicle (the Staples Sector in this case) has made a sudden turn, either higher or lower. I have noted that the final zone, March 18, has not been realized yet. Time will verify if a move should occur at this zone and market conditions will dictate which way the move will be. Keep an eye on 244 and 247 as resistance points for a rally.

S&P 500 Communications Sector

2006-03-06T19:13:00.000-05:00

The S&P 500 Communication Sector is making multi-year highs. Part of this reason is due to the recent AT&T/BellSouth deal, which is driving the rally forward today. We should see the first resistance level around the 136.00 level. If we push past that, we might be heading higher. Yet, 21 day slow stochastics are pointing to an overbought situation. Continue to watch if the market gets some momentum, but as it stands now the markets look like they are not finding any footing...

EURUSD....

2006-02-27T17:20:00.000-05:00

The markets are testing multi-year resistance levels! As we see stocks gain, we must continue to watch if there is any support for this move. Crude Oil fell back to 61.00 on easing fears if the Iran Nuclear crisis (read below). While the S&P 500 rallied to multi-year highs, it sold off towards the close on higher volume. The main concept to watch out for is the pace of this short-term rally. If prices of stocks continue to rise, we might see some capitulation from some of the short sellers, which would send this market into overdrive. Short covering would push prices into rally mode. Although geopolitical tensions seemed to have eased, it is still not clear where we are headed with the Iran nuclear situation. I believe the major players in the situation will tend to view Iran's current negotiations with Russia as a stalling tactic, leading to yet further issues concerning this matter. A continued inverted yield curve will only lead to weakened economic conditions for the economy down the road. As this earnings season begins to wrap up, what will be the immediate influences on the market? Will it be projected corporate earnings based on the American consumer or geopolitical issues. Time will tell...

The above chart shows the EUR/USD contract. We can see that support on the 1.18-1.19 level has been reached. Further oscillators suggest that the price may rebound towards a short-term price of 1.25:

1)The 14 day Relative Strength oscillator is suggesting the 2005 downtrend might be over.

2)The stochastic reading is also pointing a firming of the contract.

It must also be noted that as Venezuela and Iran continue to go against the grain with the United States. Recommendations that the price of Oil be traded in Euro's rather than the US Dollar would have a deep impact on the US public. a It is all speculation at this point, we must continue to watch the markets and make decisions as they pan out.

Mail Order Catalog Sector??

2006-02-24T11:24:00.000-05:00

The Bridge Mail Order Catalog Sector (provided by Reuters Group plc.) seems to be breaking through some resistance levels as of late. Consolidation in the 123-132 range (Dec. '05 - Feb. '06) seems to be over and it is moving towards the upside. Recent price activity has broken above the upper Bollinger Band and should continue to move higher. Next major resistance level 138 could be tested in the next few weeks. Some of the major names in this sector are:

Blair Corporation (BL)
Collegiate Pacific Inc. (BOO)
Cabela's Inc. (CAB)
Coldwater Creek Inc. (CWTR)
J.Jill Group (JILL)
Excelligence Learning Corp. (LRNS)
PC Mall Inc. (MALL)
Mediabay Inc. (MBAY)
School Specialty (SCHS)
Sportsman Guide Inc. (SGDE)
Systemax Inc. (SYX)

However, we must note that the market as a whole seems to have found resistance in its rally. While we have seen multi-year highs on some of the major indexes (Dow Industrial Average hit a high of 11159.18, first time over 11,000 since 2001) the market has not responded to the upside with breadth. Geopolitical concerns weigh heavily on investors minds going forward; mainly:

1) Iraq
2) Iran
3) Oil situation in Nigeria and Saudi Arabia
4) The Islamic nation's response to the cartoon situation

The Yield Curve continues to be inverted. Shorter term treasuries are yielding higher than longer term treasuries. This could bode negative consequences for the economy in the near-term future (Take a look at the Yield Curve Chart from 2/13/06).

Gold 2/17/2006

2006-02-17T16:13:00.000-05:00

The recent slide in gold seems to have held its upward trend. The yellow trend lines in the chart above suggest that Gold still is in a bullish rally and might go higher. Great consumer spending numbers out the other day led the markets higher, yet today's PPI number (the calculation of how producers in the country decide to sell their goods, primarily due to their costs to make the goods) suggests that inflation is still a concern. Take a look at my updated chart of the 2/10 year yield curve inversion rate and you can see that the inversion in 2000 resulted in a major S&P 500 index decline. This happened before the 9/11 attacks and terrorism issues which affected the markets. As of late December 2005, another inversion has taken place which can produce a similar effect. Another issue is that we have yet to see this market put in big gains to the upside. While we have solid gains in the major averages, resistance might stall a rally. As the markets are off on Monday, we have a long weekend to see how geopolitical issues will pan out (mainly the situation in Nigeria) for the markets.

Consumers step up to the plate in Jan. '06

2006-02-14T16:11:00.000-05:00

The American public never disappoints! Recent retail sales numbers from Jan. '06 have risen to 2.2 %(excluding auto sales), up substantially from an estimated 0.9% and last months number of 0.4%. What does this mean? It means that people are willing to spend money on anything from high tech items to daily staples. The market did indeed react well to this number. The Dow drove past 11,000 and oil fell below $60 per barrel, both of which are huge psychological levels. With a number this big, the market took a leap forward probably due to short covering. I'll dig some more and be back with more research....

Yield Curve Inversion

2006-02-13T13:56:00.000-05:00

The current market conditions are dictating that money flow into equities is very lackluster. As for the year, the market did rally as funds put a small portion of capital into equities. Yet we still have yet to see a large amount of capital being put to use on for money market funds. The link on this post's title will lead you to Investment Company Institutes (ICI) statistical research on where money is flowing. According to ICI, in Dec. 2005 money was pouring into money market accounts at a 3% pace over the prior month. This suggests that profits are being taken and safeguarded against interest rate developments (Bernanke is speaking on Wed.) as well as geopolitical tensions.
Looking at the chart above, the yield inversion between the 10 Year (white) and 2 Year (green) notes is shown at two different periods. The first period, roughly the whole year of 2000, show that the 2 year yield has risen above the 10 year yield. This pattern suggests that a possible recession lies ahead. Over time, this idea was proven by the lack luster performance of the economy from 2001 to 2003. The second period is the current state of the yield curves. Beginning in late Dec. 2005, this inversion seems to be gaining some momentum. If we see a continued inversion pattern between the 2 yield curves, 2006 might be a year of less than forecasted growth. It still needs to be determined if the economy can shrug this off, as some have suggested that this inversion means nothing. Seems like the late 90's tech rally when people said EPS and PE Ratios should be tossed aside. Follow the trend folks.

Waste Management

2006-02-08T18:13:00.000-05:00

Waste Management Incorporated seems to be breaking through its recent consolidation period. Rangebound over the last 2 years between 34.40 and 27.00, consolidation is over and it is moving to the upside (as of 2/8/06 - 32.54). It will be interesting to see if it breaks through the resistance levels of 32.62 (week of 12/6/97) and 34.44 (week of 2/7/98).

Target Corporation

2006-02-07T21:50:00.000-05:00

Target Corporation could possibly break out one way or the other soon. Bollinger Bands are tightening. This classic pattern suggests that there will be a major move, either to the upside or downside. Volatility has dried up and the price has been stuck in a small trading range as of lately. Time will only tell when it breaks. Major support levels are 53.70 and 47.40. Resistance levels are 58.90, 59.29, and 60.

A Possible East vs. West scenario

2006-02-03T13:37:00.000-05:00

The recent spat over the Islamic resistance to the Danish photo of the Prophet Mohammad in a “bomb turban” has given rise to a possible New World Order. Across the headlines of major newspapers of the world, the people of Islamic countries are very upset about this development and are in the process of banning Western goods and services. There seems to be a real, identifiable resentment to the West over this issue. People in Islamic nations are moving towards a pro-Eastern stance. As this story is developing, it is going to be interesting to see what ideology will become out of this, especially on the threshold of a global effort to deal with the Iranian nuclear confrontation. I will notify you of any developments on this front.

Consumer Weakness?

2006-02-03T10:15:00.000-05:00

The S&P 500 Consumer Discretionary Sector seems to be going through a tough period. Recent concerns about the U.S. consumer being able to sustain the buying activity in 2006 maybe coming to fruition.

The homes sales data of as lately seems to suggest that fewer people are buying houses, even though interests are considerably lower from previous years. Housing starts have increased in Dec. 2005 to 1.9 (mln) from 2.12 (mln) in Nov. 2005. Yet the forecast for New Home sales for Dec. 2005 are expected to decrease from the Nov. 2005 number. While it a seasonally slow time for home sales, we must be concerned about this possible setback to our economy. Over the last couple of years, home owners have sought refinancing as a means to access more money. At lower interest rates, this makes sense for those who have had high mortgage rates. Yet, while homeowners begin to take on more debt, they might not have money to sustain their discretionary buying. Money being borrowed against the cost of homes to pay for new cars, home remodeling, and discretionary spending (buying electronics, luxury goods, etc.)will take its toll on the US public. Money will be conserved for staples such as gas, food, etc.

The chart above suggest that the S&P Discretionary Sector might be headed lower. Resistance might be an issue as the sector begins to consolidate. Price studies have shown that the sector's 21 day slow stochastic is weakening, and the moving averages are beginning to tighten. More time will be needed to determine the actual course of the economy.

Iran issue weighs on markets

2006-01-22T14:19:00.000-05:00

The Iran nuclear issue continues to expand and a resolution might not be in sight. Both sides are adamant about their positions and will stick by them even if it means war.

The Fed should raise interest rates during the first meeting of 2006 mainly due to the raise in commodity prices. The price of March '06 oil futures, for example, is closing in on the 8/31/05 high of 70.85 per barrel. The results of corporate earnings from 4Q05 is starting off on a bad footing. Coupled these issues with the Iran situation, Wall Street is beginning to take profits to lock in the gains should they not come later in the year.

All this said, there should be a sign as to where money is flowing since it is being pulled from equities. As I said before, gold as well as other metals will see some of this flow. Looking at the chart below, we can see that Heating Oil (traded on the NYMEX) is advancing. The white trend line shows how the price of heating oil is in an upward trend. The lows in late December have just confirmed the bullish trend and the price is beginning to move higher since its recent move past the early December '05 high around 1.895. As it passed the 1.895 level, we should see some resistance at 2.oo-2.10. Given the economic climate, a price move higher could be expected.

The Natural Gas contract (chart below) has shown some signs of being oversold. While the huge price movement in the last 2 quarters of 2005 are mostly over with, we could still see a trading opportunity here. The recent Commodity Channel Index (CCI) move above the -100 level indicates a buying opportunity. While the downside seems to be limited to $8.00, a price movement to the $10-$12 range should not be ruled out given the current situation the market is in (as discussed above).

Continuing to gather intelligence as to where the market might be headed....

S&P 500 (SPX) rally in 2005?

2006-01-16T12:47:00.000-05:00

Can the equity markets pull off new all-time highs in 2006?
The cup and handle formation is a classic bullish indicator that indicates that the underlying stock, or in this case the SPX index, will be heading in an upward direction. As time unfolded, the SPX index rallied along with the rest of the market at the end of 2005. Based off of this chart, we might see some higher prices going into 2006, but beware the factors of a possbile Iran nuclear conflict, fed rate hikes, and poor corporate earnings outlook. These issues could pose an obstacle for a rally.

Gold in 2006!

2006-01-15T20:36:00.000-05:00

Is Gold going higher?
Technical analysis indicates that gold might reach $700/ troy ounce in 2006. Indicators suggest a slightly overbought recommendation short term, but the demand for gold among foreign markets will continue. There are numerous indications that support a move higher. These range from:

USD weakness going foward
Gold as a safe haven to the emerging middle class in overseas markets
Exotic currencies backed by gold reserves
International political tensions
Possible supply strains

With this said, there could also be another reason why gold might move higher. The notion that a slight inflation increase as time progresses is common evolution of economic principles. As we see inflationary tendancies in prices of oil and metals (i.e. gold, platinum, silver), the overall well-being of our economy is strong and such a move suggests our nation is growing financially.