Saturday, December 31, 2011
Friday, December 30, 2011
2011 Market Wrap-up
2011...what a year! A year of social unrest, demonstrations, riots, government overthrows, mass murders, earthquakes, tsunamis, floods, nuclear reactor meltdowns, political discord, economic distress (the "R" word has resurfaced), austerity, financial weakness, credit rating downgrades, volatility, financial fraud, law suits, assassinations, and the passing of Steve Jobs...no wonder the markets have been so reactive (sometimes quite violently) rather than proactive in a measured manner.
Here's a look at how some markets closed out 2011...actually, I'm a bit surprised that the U.S. Equity Market Indices aren't down more, considering the above turmoil...perhaps they've been artificially elevated...
The Dow Utilities Index was the big gainer among the Dow 30, Dow Transports, S&P 500, Nasdaq 100, and Russell 2000 Indices, as shown on the Year-to-date graph below (courtesy of www.Stockcharts.com).
The second Year-to-date graph below shows that these Major Indices are all at some form of trendline resistance.
The European Financials ETF, EUFN, was the biggest loser among the Commodities ETF, DBA, the Agricultural Commodities ETF, DBC, the Emerging Markets ETF, EEM, the U.S. Financials ETF, XLF, and the Chinese Financials ETF, GXC, as shown on the Year-to-date graph below.
The second Year-to-date graph below shows that, although DBC has stabilized, DBA has not and is still in downtrend...EEM is in between triangle support and resistance...and XLF, EUFN & GXC are in between triangle support and resistance.
The U.S. $ was the biggest gainer among the Euro (the biggest loser), the Canadian $, the Aussie $, and the British Pound, as shown on the Year-to-date graph below.
The second Year-to-date graph below shows that the U.S. $ is at near-term resistance, the Euro is still trending down, the Canadian and Aussie $ are in between triangle support and resistance, and the Pound is at near-term support.
Oil and Gold were the biggest gainers compared to Copper, as shown on the Year-to-date graph below.
The second Year-to-date graph below shows that Oil is at resistance, while Gold is just above support, and Copper is in between triangle support and resistance.
The VIX ended up nearly 32%, as shown on the Year-to-date graph below.
The second graph shows that the VIX ended just above major support and just below near-term resistance. It ended the year up, compared with a neutral ending for equities...an interesting correlation...and one to watch...not all may be as stable as may appear from the Equity Indices...particularly in view of the 170% increase in volatility that we saw in August.
The biggest gainers of the year, overall, were Dow Utilities, Oil, Gold, and the U.S. $, with U.S. Equities ending generally neutral, the Euro the biggest currency loser, Emerging Markets a big loser at nearly 19%, Copper a big loser at 24%, and Financial markets (U.S. and Chinese), especially the European (at 27%), the biggest losers.
The question will be whether stability returns to the European markets and whether recent stability can hold and improve in Emerging Markets for 2012, or whether volatility (VIX) will rise again...the VIX is still elevated, so there is a good possibility that it will. No doubt, all market action will be reflective of upcoming world news events, as well as consumer and investor sentiment, together with risk vs safety appetite. A couple of gauges that I'll follow in this regard are the VIX, U.S. $, and Copper, as well as the other instruments noted above. Without benefit of major Fed QE intervention, I imagine that next year could be range-bound...within this year's high and low, generally...although unforeseen catastrophes could send the Major Indices below this year's lows. As I noted in my post of September 30th, 2011, major support levels for the Major Indices are: http://strawberryblondesmarketsummary.blogspot.com/2011/09/who-won-pinball-game-in-3rd-quarter-of.html
I hope that 2012 blossoms into much peace, prosperity and happiness for each of you! Thanks to all who have shared their insight and from whom I've learned a great deal. A huge thanks to my trading friends for your kind support this year...you helped me keep my sanity...Smudge is very grateful for that! :-)
Here's a look at how some markets closed out 2011...actually, I'm a bit surprised that the U.S. Equity Market Indices aren't down more, considering the above turmoil...perhaps they've been artificially elevated...
The Dow Utilities Index was the big gainer among the Dow 30, Dow Transports, S&P 500, Nasdaq 100, and Russell 2000 Indices, as shown on the Year-to-date graph below (courtesy of www.Stockcharts.com).
The second Year-to-date graph below shows that these Major Indices are all at some form of trendline resistance.
The European Financials ETF, EUFN, was the biggest loser among the Commodities ETF, DBA, the Agricultural Commodities ETF, DBC, the Emerging Markets ETF, EEM, the U.S. Financials ETF, XLF, and the Chinese Financials ETF, GXC, as shown on the Year-to-date graph below.
The second Year-to-date graph below shows that, although DBC has stabilized, DBA has not and is still in downtrend...EEM is in between triangle support and resistance...and XLF, EUFN & GXC are in between triangle support and resistance.
The U.S. $ was the biggest gainer among the Euro (the biggest loser), the Canadian $, the Aussie $, and the British Pound, as shown on the Year-to-date graph below.
The second Year-to-date graph below shows that the U.S. $ is at near-term resistance, the Euro is still trending down, the Canadian and Aussie $ are in between triangle support and resistance, and the Pound is at near-term support.
Oil and Gold were the biggest gainers compared to Copper, as shown on the Year-to-date graph below.
The second Year-to-date graph below shows that Oil is at resistance, while Gold is just above support, and Copper is in between triangle support and resistance.
The VIX ended up nearly 32%, as shown on the Year-to-date graph below.
The second graph shows that the VIX ended just above major support and just below near-term resistance. It ended the year up, compared with a neutral ending for equities...an interesting correlation...and one to watch...not all may be as stable as may appear from the Equity Indices...particularly in view of the 170% increase in volatility that we saw in August.
The biggest gainers of the year, overall, were Dow Utilities, Oil, Gold, and the U.S. $, with U.S. Equities ending generally neutral, the Euro the biggest currency loser, Emerging Markets a big loser at nearly 19%, Copper a big loser at 24%, and Financial markets (U.S. and Chinese), especially the European (at 27%), the biggest losers.
The question will be whether stability returns to the European markets and whether recent stability can hold and improve in Emerging Markets for 2012, or whether volatility (VIX) will rise again...the VIX is still elevated, so there is a good possibility that it will. No doubt, all market action will be reflective of upcoming world news events, as well as consumer and investor sentiment, together with risk vs safety appetite. A couple of gauges that I'll follow in this regard are the VIX, U.S. $, and Copper, as well as the other instruments noted above. Without benefit of major Fed QE intervention, I imagine that next year could be range-bound...within this year's high and low, generally...although unforeseen catastrophes could send the Major Indices below this year's lows. As I noted in my post of September 30th, 2011, major support levels for the Major Indices are: http://strawberryblondesmarketsummary.blogspot.com/2011/09/who-won-pinball-game-in-3rd-quarter-of.html
- Dow 30 - 10000
- S&P 500 - 1050
- Nasdaq Composite - 2100
- Russell 2000 - 550
I hope that 2012 blossoms into much peace, prosperity and happiness for each of you! Thanks to all who have shared their insight and from whom I've learned a great deal. A huge thanks to my trading friends for your kind support this year...you helped me keep my sanity...Smudge is very grateful for that! :-)
Thursday, December 29, 2011
The Fate of Oil
Oil is up 9.1% Year-to-date, as shown on the first graph below (courtesy of www.Stockcharts.com).
The second Year-to-date graph below shows that Oil is at resistance, while Gold is just above support, and Copper is in in a triangle formation in between support and resistance.
The Year-to-date chart of Oil below shows that Oil is sitting just above confluence (price, Fibonacci, Monthly VWAP, and Year-to-date Volume Profile POC) support at 99.00. The prior bearish Death Cross moving average formation has now changed, as of December 22, 2011 to a bullish Golden Cross formation. Price has been unable to hold above resistance at 102.00 since May of this year...a break and hold above this level could fuel a further rally in equities...failure to hold above 99.00 could send equities tumbling. Whether or not its near-term fate from today lies with the future direction of Gold and Copper remains to be seen.
The second Year-to-date graph below shows that Oil is at resistance, while Gold is just above support, and Copper is in in a triangle formation in between support and resistance.
The Year-to-date chart of Oil below shows that Oil is sitting just above confluence (price, Fibonacci, Monthly VWAP, and Year-to-date Volume Profile POC) support at 99.00. The prior bearish Death Cross moving average formation has now changed, as of December 22, 2011 to a bullish Golden Cross formation. Price has been unable to hold above resistance at 102.00 since May of this year...a break and hold above this level could fuel a further rally in equities...failure to hold above 99.00 could send equities tumbling. Whether or not its near-term fate from today lies with the future direction of Gold and Copper remains to be seen.
European Money Supply and Private Loans Dip
Another time-out from my mini-holiday to slip this in:
Data released pre-market today showed a drop in European Money Supply, as shown on the graph below (courtesy of www.forexfactory.com). As can be seen, the total quantity of domestic currency in circulation and deposited in banks is still well below the levels seen from 2000 to 2009...not a healthy sign that would point to additional spending and investment in Europe.
Additionally, data released pre-market today showed a drop in Private Loans to consumers and businesses, as shown on the graph below. As well, the level of loans taken out are well below the levels seen from 2003 to 2009...which indicates that consumers and businesses are not confident in their future financial position, nor do they feel comfortable spending money.
Below is a Monthly chart of EUR/USD. At the moment, price has dipped below the 1.30 level and is hovering below trendline support. It has had difficulty moving above the 1.50 level since 2009 and has been, basically, range-bound from around 1.90/20 to 1.50. There is confluence support around 1.24...a break of that level could send price down to 1.20...a break of that level with confidence could see price drop to a confluence support level around 1.09/10.
This big picture view of the Euro tells me that it is weak and has not been able to sustain its rallies above 1.20 since October 2008. I wouldn't be surprised to see it retest that level sometime in the new year, with a possible dip, or significant drop, below. Also, the economic releases out of Europe lately (which I've posted) all point to a shrinking economy...there's no reason the currency shouldn't also follow suit.
Back to my holiday...
Data released pre-market today showed a drop in European Money Supply, as shown on the graph below (courtesy of www.forexfactory.com). As can be seen, the total quantity of domestic currency in circulation and deposited in banks is still well below the levels seen from 2000 to 2009...not a healthy sign that would point to additional spending and investment in Europe.
Additionally, data released pre-market today showed a drop in Private Loans to consumers and businesses, as shown on the graph below. As well, the level of loans taken out are well below the levels seen from 2003 to 2009...which indicates that consumers and businesses are not confident in their future financial position, nor do they feel comfortable spending money.
Below is a Monthly chart of EUR/USD. At the moment, price has dipped below the 1.30 level and is hovering below trendline support. It has had difficulty moving above the 1.50 level since 2009 and has been, basically, range-bound from around 1.90/20 to 1.50. There is confluence support around 1.24...a break of that level could send price down to 1.20...a break of that level with confidence could see price drop to a confluence support level around 1.09/10.
This big picture view of the Euro tells me that it is weak and has not been able to sustain its rallies above 1.20 since October 2008. I wouldn't be surprised to see it retest that level sometime in the new year, with a possible dip, or significant drop, below. Also, the economic releases out of Europe lately (which I've posted) all point to a shrinking economy...there's no reason the currency shouldn't also follow suit.
Back to my holiday...
Wednesday, December 28, 2011
Yet Another Indicator Confirming European Economic Weakness
A quick time-out from my mini-holiday to report this...
Data released today showed a further drop in the Swiss economy, as shown on the graph below (courtesy of www.forexfactory.com). It's a combined reading of 12 economic indicators related to banking confidence, production, new orders, consumer confidence, and housing. It's designed to predict the direction of the economy over the following 6 months. The impact tends to be significant, but varies from month to month. It's just another set of data that's been released lately which confirms weakening in the European economy.
At the moment the EUR/USD has broken below recent support of 1.30 and is hovering just above a downtrend line, as shown on the 4-hour chart below...it has made a new low today over the course of the past 180 days.
Additionally, the European Financial ETF, EUFN, has also dropped in today's trading and is sitting just above recent support of 14.70, as shown on the 4-hour chart below...it is showing relative strength to the EUR/USD...further weakening of this ETF should have a negative impact on the Euro, particularly if it breaks its 180 day low of 13.71.
Back to my holiday...
Data released today showed a further drop in the Swiss economy, as shown on the graph below (courtesy of www.forexfactory.com). It's a combined reading of 12 economic indicators related to banking confidence, production, new orders, consumer confidence, and housing. It's designed to predict the direction of the economy over the following 6 months. The impact tends to be significant, but varies from month to month. It's just another set of data that's been released lately which confirms weakening in the European economy.
At the moment the EUR/USD has broken below recent support of 1.30 and is hovering just above a downtrend line, as shown on the 4-hour chart below...it has made a new low today over the course of the past 180 days.
Additionally, the European Financial ETF, EUFN, has also dropped in today's trading and is sitting just above recent support of 14.70, as shown on the 4-hour chart below...it is showing relative strength to the EUR/USD...further weakening of this ETF should have a negative impact on the Euro, particularly if it breaks its 180 day low of 13.71.
Back to my holiday...
Tuesday, December 27, 2011
Holiday Week
Today's action, so far, tells me not to bother trading this week...will take some time off to snooze with Smudge, instead...so I probably won't be posting until the weekend. Good luck to all!
Monday, December 26, 2011
European Stability Mechanism
This excerpt is from Wikipedia:
"The European Stability Mechanism (ESM) is a permanent rescue funding programme to succeed the temporary European Financial Stability Facility and European Financial Stabilisation Mechanism in the 17-member Eurozone. The ESM is due to be launched as soon as Member States representing 90% of the capital commitments have ratified it, which is expected in July 2012.[1]"
Here is the link to that article:
http://en.wikipedia.org/wiki/European_Stability_Mechanism
Below is a video on this subject, which a trading acquaintance recently brought to the attention of fellow traders:
"The European Stability Mechanism (ESM) is a permanent rescue funding programme to succeed the temporary European Financial Stability Facility and European Financial Stabilisation Mechanism in the 17-member Eurozone. The ESM is due to be launched as soon as Member States representing 90% of the capital commitments have ratified it, which is expected in July 2012.[1]"
Here is the link to that article:
http://en.wikipedia.org/wiki/European_Stability_Mechanism
Below is a video on this subject, which a trading acquaintance recently brought to the attention of fellow traders:
From my limited exposure to this proposal, it appears to me that they're going to create a bottomless money-sucking vacuum with no accountability from a select few in charge...sounds like a hard-line dictatorship in the making to me...
Sunday, December 25, 2011
Merry Christmas 2011!
The following Christmas-theme graphics are provided, courtesy of www.infographiclist.com, together with their respective links (clink on link to see large version):
A description of the Twelve Days of Christmas is provided by this Wikipedia link: http://en.wikipedia.org/wiki/Twelve_Days_of_Christmas
Enjoy your day!
Saturday, December 24, 2011
3 Dows...DBC vs AUD/USD...DBA vs POT vs SPX
Below are 3 Daily chartgrids of the following (first I'll show a series of charts, then provide some general comments and a summation at the end of this post):
Below are a series of percentage comparison charts of these instruments on varying timeframes:
General Observations:
Summary:
Generally, these markets are beginning to look a bit overbought. However, with momentum in positive territory, they may only pull back sufficiently to relieve this situation in the short term...a "tell" as to whether they may then continue to rally would be to see if momentum stays above zero. I'd look for continued strength in DBC and AUD/USD...any developing weakness of significance could have an negative effect on the equity markets. I'd also look for continued strength in DBA and POT...a drastic drop in POT could, ultimately, have a major impact on the equity markets.
- 3 Dows
- DBC (Commodities ETF) and AUD/USD
- DBA (Agricultural Commodities ETF), POT and SPX
Below are a series of percentage comparison charts of these instruments on varying timeframes:
General Observations:
- All instruments are at or near their overbought level on the Stochastics indicator
- Momentum is in positive territory above Zero on all instruments
- The only one to have made a new high since August this year is the Dow Utilities, and it is in a definite uptrend on the Daily timeframe
- Of the 3 Dows, Utilities has been leading in strength this year, followed by the Dow 30, then Transports
- They have all rallied this past week
- The Dow 30, Dow Transports, and SPX are attempting to re-form an uptrend on the Daily timeframe
- DBC, AUD/USD, DBA, and POT are all still in definite downtrend
- During the past 30 days, DBC fell below the AUD/USD, but regained in terms of strength the past 4 days
- During the past 5 Years, POT has shown relative strength as compared to DBA and SPX...SPX began to diverge and fall in 2008, while POT shot up to new highs...POT was the first to show signs of recovery before SPX near the end of 2008...during the Year-to-date, we're seeing a divergence this past quarter with SPX advancing while POT and DBA continue to drop, apart from an upswing this past week
- Over the past 10 Days, POT and DBA stabilized...DBA moved above SPX...and POT jumped ahead of both DBA and SPX during the past 2 days
Summary:
Generally, these markets are beginning to look a bit overbought. However, with momentum in positive territory, they may only pull back sufficiently to relieve this situation in the short term...a "tell" as to whether they may then continue to rally would be to see if momentum stays above zero. I'd look for continued strength in DBC and AUD/USD...any developing weakness of significance could have an negative effect on the equity markets. I'd also look for continued strength in DBA and POT...a drastic drop in POT could, ultimately, have a major impact on the equity markets.
Twas the Night Before Christmas...
The origins of the poem, "Twas the Night Before Christmas," are described here: http://en.wikipedia.org/wiki/A_Visit_from_St._Nicholas
Where I have and have not been... ;-)
I have been in many places, but I've never been in Cahoots. Apparently, you
can't go alone. You have to be in Cahoots with someone.
I've also never been in Cognito. I hear no one recognizes you there.
I have, however, been in Sane. They don't have an airport; you have to be driven there. I have made several trips there, thanks to my friends, family and work.
I would like to go to Conclusions, but you have to jump, and I'm not too much on physical activity anymore.
I have never been in Doubt. That is a sad place to go, and I try not to visit there.
I've been in Flexible, but only when it was very important to stand firm.
Sometimes I'm in Capable, and I go there more often as I'm getting older.
One of my favorite places to be is in Suspense! It really gets the adrenalin flowing and pumps up the old heart! At my age I need all the stimuli I can get!
And more and more I think of the Here After .. Several times a day, in fact, I enter a room and think "What am I here after?"
I've also never been in Cognito. I hear no one recognizes you there.
I have, however, been in Sane. They don't have an airport; you have to be driven there. I have made several trips there, thanks to my friends, family and work.
I would like to go to Conclusions, but you have to jump, and I'm not too much on physical activity anymore.
I have never been in Doubt. That is a sad place to go, and I try not to visit there.
I've been in Flexible, but only when it was very important to stand firm.
Sometimes I'm in Capable, and I go there more often as I'm getting older.
One of my favorite places to be is in Suspense! It really gets the adrenalin flowing and pumps up the old heart! At my age I need all the stimuli I can get!
And more and more I think of the Here After .. Several times a day, in fact, I enter a room and think "What am I here after?"
Friday, December 23, 2011
Gappy Christmas!
Below are a series of chartgrids of the YM, ES, NQ & TF. I'll provide a bit of commentary on each.
Year-to-date Weekly charts:
Year-to-date Daily charts:
4-Hour charts:
Year-to-date Daily charts:
20-Day 30-minute (market hours only) charts:
In conclusion, each one is at a level of confluence resistance. This latest rally has taken place on declining volumes. The rally from November 25th contains several unfilled gaps...these markets have only been able to rally within the "Thin Ice Zone" after gapping up on thinly-traded overnight pushes...a further and sustainable advance above their current price levels without, first, filling these gaps, is suspect.
Year-to-date Weekly charts:
- Each e-mini futures index is either at or near a resistance confluence of price plus indicator
- YM is at Volume Profile POC, but trading above its mid-Bollinger Band and 50 sma (red)
- ES is at its 50 sma, above its mid-Bollinger Band, and below its POC
- NQ is at just below its POC and 50 sma, and above its mid-Bollinger Band
- TF is below its 50 sma, well below its POC, and above its mid-Bollinger Band
Year-to-date Daily charts:
- Each one is either at or near a resistance confluence of price plus indicator
- YM, ES & TF are still under the influence of the bearish moving average Death Cross formation
- YM is approaching its upper Bollinger Band, and is above its POC, 50 & 200 smas
- ES is just above its 200 sma (pink), is above its Mid-Bollinger Band and 50 sma, and is well below its POC
- NQ is just below its 200 and 50 smas, is just above its mid-Bollinger band, and is further below its POC
- TF is below its 200 sma, above its mid-Bollinger Band and 50 sma, and is well below its POC
4-Hour charts:
- Each one is either at or near a resistance confluence of price plus indicator, and volumes have been steadily declining on this latest rally since their December lows
- YM is at its upper Bollinger Band and above the 50 & 200 smas
- ES is at its upper Bollinger Band and above the 50 & 200 smas...still under the influence of the bearish moving average Death Cross formation
- NQ is at its 200 sma and above its 50 sma, and in between its upper and mid-Bollinger Bands...still under the influence of the bearish moving average Death Cross formation
- TF is above both the 50 and 200 smas, and is in between its upper and mid-Bollinger Bands
Year-to-date Daily charts:
- All are now trading above their "Thin Ice Zone"...the top and bottom levels are the high and low of the August 5th candles (the day of the U.S. credit rating downgrade)...I've written a number of posts on this zone and this one on December 14th explains: http://strawberryblondesmarketsummary.blogspot.com/2011/12/some-bears-are-still-awake.html
- YM is well above its 61.8% Fibonacci retracement level
- ES closed just above its 61.8% Fibonacci retracement level, once again
- NQ closed just above its 61.8% Fibonacci retracement level, once again
- TF closed just above its 50% Fibonacci retracement level, once again
20-Day 30-minute (market hours only) charts:
- Each one has several unfilled gaps from its November 25th swing low
In conclusion, each one is at a level of confluence resistance. This latest rally has taken place on declining volumes. The rally from November 25th contains several unfilled gaps...these markets have only been able to rally within the "Thin Ice Zone" after gapping up on thinly-traded overnight pushes...a further and sustainable advance above their current price levels without, first, filling these gaps, is suspect.
Diverging Data
A variety of data released today, shows a divergence between a decline in personal spending and income versus an increase in new home sales (although sales remain depressed at the lows of their 2008/09/10 levels), as shown on the three graphs below (courtesy of www.forexfactory.com).
It appears that more household debt is being accumulated than can be effectively managed.
Canada's GDP declined from 0.2% to 0.0%, as shown on the graph below...another indicator of a slowdown in global growth.
It appears that more household debt is being accumulated than can be effectively managed.
Canada's GDP declined from 0.2% to 0.0%, as shown on the graph below...another indicator of a slowdown in global growth.
Thursday, December 22, 2011
S&P 500 vs (nearly) Everything Else
Below is an updated Daily chartgrid, about which I wrote in my post of December 20th: http://strawberryblondesmarketsummary.blogspot.com/2011/12/markets-sample-christmas-pudding-early.html
In a nutshell, the ES (S&P 500 e-mini futures index) is high-basing after its big rally that day...a sign of distribution on lower volumes, potentially, in preparation for a push higher. There is considerable resistance overhead, however, but with the VIX trading below 25.00 now, that may be a higher probability than in recent months. Of note, however, is the fact that the U.S. $ is still trading near its highest levels since equities fell in July of this year...something to watch and see if the $ continues to rally, particularly under the scenario that I've described in my last post: http://strawberryblondesmarketsummary.blogspot.com/2011/12/currency-wars-about-to-begin.html
The first graph below (courtesy of www.forexfactory.com) shows a drop in the CB Leading Index...yet another indicator which shows a softening of economic conditions relating to employment, production, new orders, consumer confidence, housing, stock market prices, money supply, and interest rate spreads. The second graph shows a drop in the Home Price Index, which is a leading indicator of the housing industry's health.
Perhaps these are saying that the markets are overvalued at their current levels...time will tell.
In a nutshell, the ES (S&P 500 e-mini futures index) is high-basing after its big rally that day...a sign of distribution on lower volumes, potentially, in preparation for a push higher. There is considerable resistance overhead, however, but with the VIX trading below 25.00 now, that may be a higher probability than in recent months. Of note, however, is the fact that the U.S. $ is still trading near its highest levels since equities fell in July of this year...something to watch and see if the $ continues to rally, particularly under the scenario that I've described in my last post: http://strawberryblondesmarketsummary.blogspot.com/2011/12/currency-wars-about-to-begin.html
The first graph below (courtesy of www.forexfactory.com) shows a drop in the CB Leading Index...yet another indicator which shows a softening of economic conditions relating to employment, production, new orders, consumer confidence, housing, stock market prices, money supply, and interest rate spreads. The second graph shows a drop in the Home Price Index, which is a leading indicator of the housing industry's health.
Perhaps these are saying that the markets are overvalued at their current levels...time will tell.
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