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The charts, graphs and comments in my Trading Blog represent my technical analysis and observations of a variety of world markets...
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Thursday, June 26, 2014

SPX:VIX Ratio Consolidating at Record High Levels

Since my post of June 8th (wherein I noted that the SPX:VIX ratio had overshot its technical resistance limit, and price and Momentum had reached all-time record highs), price has been fluctuating, primarily above the 150.00 level, currently near-term support, as shown on the following 20-year Weekly ratio chart.

As long as price remains above 150.00 I'd say that buying will re-enter the SPX and push price even higher on this ratio. We'll see whether Momentum confirms, if such a scenario occurs...and, if it signals support for any sustained buying above resistance at 180.00.

The next support levels are at 140.00 and 110.00, if we see selling in the SPX. Either way, we may see a continued consolidation until price breaks and holds either above 180.00 or below 150.00...or, even some pretty large volatile swings in between 180.00 and 110.00, until a break and hold pattern is established, one way or the other.


Friday, June 20, 2014

Inflation: Alive and Well in Canada...Rate Hike Ahead?

As Canadians, we are "privileged" to live in a country plagued by -40° C temperatures, ice storms, hurricanes, and tons of snow in the winter and +30° C temperatures, flooding, tornadoes, mosquitoes, and black flies in the spring and summer...and, we live in constant threat of earthquakes along the West Coast.

Now, we are "privileged" to learn that inflation is, indeed, alive and well in Canada. This report released today from Statistics Canada shows that the Consumer Price Index (CPI) rose 2.3% in the 12 months to May, following a 2.0% increase in April...their breakdown is as follows.






In response, the Canadian Dollar is trading higher again today (Friday), as shown on the following 10-Year Weekly chart of USD:CAD. There is currently minor Fibonacci support around 1.08, while the 1.10 level has been quite "noisy" this year.

Any plunge and hold below the 1.065 major support level may pose some cause for concern on the part of the Bank of Canada, particularly if inflation continues to rise or remain elevated...if it does, we'll see whether it creeps across the border into the U.S.

So, rate hike ahead for Canada?...or, even the U.S.?


Wednesday, June 18, 2014

Spread Between Brent Crude Oil & WTIC Light Crude Oil

I last mentioned the spread between Brent Crude Oil and WTIC Light Crude Oil in this post on May 5th, 2013. At that time, price had narrowed considerably between these two.

The following 3-Year Daily ratio chart of BRENT:WTIC shows that the spread has been widening recently in favour of Brent. With the positive cross of the RSI above 50 and the positive cross-overs of the MACD and Stochastics, it would appear that this spread may continue to widen...if price can break and hold above the 50 and, possibly, 200 MAs.


The following 3-Year Daily chart of Brent shows that major resistance lies higher than current price at 117.00-119.00.


The following 3-Year Daily chart of WTIC shows that major resistance awaits at around 112.00.


With RSIs in their upper range on both of these two charts, we may see some profit-taking sometime soon...however, the RSIs aren't signalling any divergence, nor is momentum (which is above the zero level on both)...and, both are under the bullish influence of recent Golden Cross formations. The only divergence is the Stochastics on WTIC, with a negative cross-over, as well. We'll see whether the recent climb in both Brent and WTIC continues and whether the spread widens further in favour of Brent.

Sunday, June 08, 2014

Overshooting the Limit

Further to my post of May 22nd, the SPX:VIX ratio has now overshot its limit. As shown on the Weekly ratio chart below, price has now punched above major channel, trendline, Fibonacci, and price resistance and sits at another all-time high. As well, Momentum has advanced to an extreme all-time high level...exceeding even the exuberant levels reached in 2006/07 before the financial crisis.


The Daily chart below of the ES (S&P 500 E-mini futures index) shows a steady price climb within a rising channel from the breakout in 2013. If price continued to rise at the same pace, remained within this channel, and remained above the 50% Fibonacci fanline (green dotted line), theoretically, price could reach 1990ish by the end of June (or sooner), 2100ish by mid-August, and 2240ish by this Christmas...these are all confluence resistance levels (a combination of Fibonacci fanlines, Fibonacci extension, and channel).

However, such a climb within those time periods could, inevitably, create a massive price bubble-like environment, judging by the current extreme Momentum level shown on the ratio chart above...we may see lots of manipulation of price in between those dates to allow prices to drop at various points in order to relieve such high levels of froth...so, we may see elevated levels of short-term volatility surface within mini -bubbles now and then, and, perhaps, even more frequently for the remainder of this year.

With the Fed holding interest rates low, it's likely the institutions will continue to take advantage of this facility and push prices higher...however, any unexpected spike in inflation may cause them to reconsider their position...so, nothing is ever certain...with the possible exception of volatility and froth.


Best of luck for this week!