Strawberry Blonde's Market Summary

Non-Manufacturing PMI Up...Factory Orders Down

2012-03-05T11:00:00.000-05:00

Mixed data released today shows that ISM Non-Manufacturing PMI rose, while Factory Orders declined, as shown on the graphs below...conflicting messages for a second month. Take your pick as to which one you like!

As I write this, Dow stocks are down by about 5 to 1, S&P 500 stocks are down by almost 4 to 1, Nasdaq stocks are down by about 3 to 1, and Russell 2000 stocks are down by a little over 2 to 1.

The 4-Hour charts below of the YM, ES, NQ & TF show that the YM, ES & NQ are at the bottom of their trading ranges, while the TF has broken below (last week)...the YM, ES & TF are currently trading below their 50 sma (red). Selling came in on all four e-mini futures indices after these reports were released. A break with conviction and hold below these current levels, would be bearish. Various Fibonacci retracement levels are plotted on each chart (taken from their January low) and represent support levels, as well as the 200 sma (pink) and the Monthly Volume Profile POC (heavy horizontal pink line)...ones to watch this week.

Happy Birthday, S&P 500 Index!...March 4, 1957

2012-03-04T13:46:00.001-05:00

From Wikipedia...the S&P 500 Index began in its present form on March 4, 1957.

"Standard & Poor's introduced its first stock index in 1923. Before 1957, its primary daily stock market index was the "S&P 90", a value-weighted index based on 90 stocks. Standard & Poor's also published a weekly index of 423 companies. The S&P 500 index in its present form began on March 4, 1957. Thanks to the computer technology emerging at the time, this index could be calculated and disseminated in real time. The S&P 500 is widely employed as a measure of the general level of stock prices, as it includes both growth stocks and the generally less volatile value stocks."

Money Flow for March Week 1

2012-03-02T23:16:00.002-05:00

Further to my last weekly market update, here is a summary of where money flow ended for Week 1 of March, 2012.

The Weekly charts below of YM, ES, NQ & TF show that the YM, ES and NQ made a higher close than the prior week on higher volumes. The ES did not close above its 2011 high of 1373.50, but made a higher closing high. The NQ broke out of and closed above its upper channel. The TF made a lower weekly close for a second consecutive week on higher volumes...it's also the only one not to have made a higher weekly close in February since Week 1...one to watch for possible continuing weakness, particularly if it breaks and holds below its uptrending lower channel and Fibonacci extension confluence level around 796.00.

On this timeframe, I'd put near-term support levels at 12875 for YM, 1352 for ES, 2569 for NQ (these levels being February's Volume Profile POC), and 796.00 for TF (as mentioned above).

The three Daily charts below depict support and resistance levels on Stocks Above 20-Day, 50-Day, and 200-Day Averages.

Stocks Above 20-Day Average have broken below their prior support level and sit at the next support level of 40%.

Stocks Above 50-Day Average have also broken below their prior support level and sit just above their next support level of 60%.

Stocks Above 200-Day Average have yet to break below their current support level of 65%.

From these, I'd conclude that, in the short term, stocks have turned mildly bearish, in the medium term, stocks remain mildly bullish, and in the longer term, stocks remain bullish. Further short-term downside movement in the Major Indices would cause all of these to break below their current support levels.

The VIX fell by 4.95% this past week, as shown on the graph below.

In contrast to the percentage lost by the VIX, the S&P 500 only gained 0.15%, as shown on the graph below. Of the Industry Groups, Retail was the biggest gainer, followed by the Brokers and Banks. Gold/Silver and Oil were the biggest losers, followed by Semi-Conductors. Interesting that the S&P 500 did not confirm the gain by Retail, Banks, and Brokers...a Major Index to keep an eye on for possible developing weakness.

As reflected above, the Energy Sector was the biggest loser, followed by the Industrials, Materials, and Utilities, as shown on the graph below. Consumer Discretionary, Technology, Financials, Consumer Staples, and Healthcare gained on the week.

The Emerging Markets ETF was the biggest gainer, followed by the European Financials and Chinese Financials ETFs, as shown on the graph below. The U.S. Financials ETF gained about one-third (in percentage) of what its European and Chinese counterparts gained...ones to watch in upcoming weeks. The Agricultural ETF gained nearly two-thirds of 1%.

Copper was the only metal to gain on the week, whereas Gold and Silver lost, along with Oil, as shown on the graph below. If Gold, Silver and Oil reverse course over the next week(s), it will be interesting to see if Copper continues making gains, particularly if the S&P 500 weakens.

As shown on the graph below, minor gains were made in the Major Indices, except for the Russell 2000, which lost nearly 3% (one to watch over the next weeks), and the Dow Transports (another one to watch as it closed below its 50 sma on the Daily timeframe) which had minor losses (this is the fourth week of losses for this index). The Nasdaq 100 made a 1.34% gain on the week. There was a 0.59% loss in the High Dividend-Paying Stocks ETF, minor buying in the Corporate Bonds ETF, and a 2% gain for the Emerging Markets ETF.

As shown on the graph below, the U.S. $ gained the most, followed by the Canadian $, and the British Pound. The Euro lost the most (in contrast with the gain in the European Financials ETF), followed by the Aussie $. We'll see if the U.S. $ continues to gain in the coming week(s), especially if the S&P 500 weakens. If the Euro continues to decline, this may have a drag on the European Financials ETF.

My post of February 27th made reference to the Emerging Markets ETF versus the BRIC countries. On that date, I mentioned that "Inasmuch as price on all of these instruments is trading below major resistance in the presence of negative divergences on indicators, and (with the exception of Brazil) are still subject to the influences of bearish moving average Death Cross formations, we may see a pullback occurring at some point soon. I'd keep a close watch on Russia and China for indications of possible weakness developing which may also affect the other indices and ETF...India has already been dropping and may be the signal that the others will follow suit."

As shown on the graph below, the Emerging Markets ETF and Brazil each gained 2% and 3.89%, respectively, with smaller gains made by India and China during the week. Russia made a minor loss.

As shown on the following five Daily charts below, the Emerging Markets ETF is still trading immediately below major resistance, Brazil has rallied during the week and sits below the next major resistance level, and Russia, India, and China still remain below major resistance. All of these instruments still have negative divergences on their indicators, and (with the exception of Brazil) are still subject to the bearish influences of the Death Cross formation. All ones to watch to see if weakness sets in over the next weeks.

Enjoy your weekend!

Europe's Unemployment Rate Spiked to a New 12-Year High

2012-03-01T18:58:00.000-05:00

Data released this morning shows that the unemployment rate in Europe spiked to a new 12-year high, as shown on the graph below.

Unemployment has been steadily rising, in spite of LTRO 1...we'll see if LTRO 2 makes any difference in due course...although, I very much doubt that it has any relevance or useful purpose in solving this growing problem.

Negative Divergences on CAT

2012-03-01T12:24:00.001-05:00

Below is a Daily chart of CAT. Price made a new all-time high on February 24th. There are negative divergences on the MACD, Stochastics, and RSI indicators, volumes are declining, and Bollinger Bands are tightening.

One to watch, in particular, as related to emerging markets and BRIC countries, which are also trading under similar constraints at major resistance levels, as outlined in my post of February 27th.

Near-term support lies around a Fibonacci, channel, moving average, and price confluence level of 105.00ish.

Manufacturing PMI Down...Manufacturing Prices Up...Construction Spending Down

2012-03-01T11:29:00.001-05:00

Data released today shows that:

manufacturing PMI (the relative level of business conditions including employment, production, new orders, prices, supplier deliveries, and inventories) has declined
manufacturing prices (the relative level of prices paid for goods and services) has increased
construction spending (the total amount that builders spent on construction projects) declined sharply

as shown on the three graphs below.

This latest data shows a contraction in manufacturing and construction spending while under the influence of higher manufacturing prices. As related to the personal income/spending/price of goods and services scenario that I described in my last post, this does not provide the proper support necessary for healthy and sustainable economic growth.

Prices Up...Personal Income Down...Personal Spending Up

2012-03-01T10:55:00.001-05:00

Data released this morning shows that:

the price of goods and services (excluding food and energy) has increased
personal income has declined
personal spending has increased

as shown on the three graphs below.

This latest data confirms that the debt load of consumers is increasing, while their income decreases...resulting in a two-fold increase in debt-to-earnings ratio (and this does not even take into account the price of food and energy)...not a healthy and sustainable environment or prospect for consumers. It leads me to conclude that the reason consumer spending is up is because prices are up, not because consumers have more disposable income to spend. This does not support a sustainable economic growth scenario for the country, in my opinion.

Big Drop in Aussie Private Capital Expenditure

2012-02-29T23:58:00.002-05:00

Data released Wednesday evening shows a big drop (into negative territory) in Private Capital Expenditure in Australia, as shown on the graph below.

Since it's a "leading indicator of economic health," it's one worth monitoring over the next months/quarter.

At the moment, the AUS/USD forex pair is trading in a range in between major price resistance and the +1 deviation regression channel level, as shown on the Daily chart below. Inasmuch as the MACD, Stochastics, RSI, and ROC indicators are diverging negatively, it's one to watch...near-term support lies around a confluence level of 1.04.

The Daily chart below of the Australian Index shows that price has stalled at major resistance. There are negative divergences on the RSI, MACD, and Stochastics indicators. Price is still subject to the influences of the existing bearish 50/200 sma Death Cross formation, and will be until such time as price breaks and holds convincingly above major resistance, and the moving averages cross to form a bullish Golden Cross pattern.

As I write this post late Wednesday evening, the Australian Index is currently trading 0.90% below Wednesday's close, as shown on the 5-day intraday chart below.

So, on my radar for the days ahead are the AUS/USD forex pair and the Australian Index to watch for possible further weakness, since a drop in business investment levels can be an early signal of declining future economic activity such as hiring, spending, and earnings.

Effects of ECB LTRO 2 on EUFN and EUR/USD

2012-02-29T12:02:00.001-05:00

The ECB made available $530B in loans to EU banks today in order to provide liquidity to banks...known as LTRO 2. $489B in loans (LTRO 1) was made on December 21, 2011.

The reaction, so far today, on the European Financials ETF (EUFN) has been negative, as shown on the Daily chart below. Price has been trading in a range just below major resistance, and is still subject to the bearish influences of the existing 50/200 sma moving averages Death Cross formation. Additionally, there are negative divergences in play on the MACD, Stochastics, and RSI.

Similarly, the reaction, so far today, on the EUR/USD forex pair has been negative, as shown on the Daily chart below. Price has been trading in a range just below major resistance, and is still subject to the bearish influences of the existing 50/200 sma moving averages Death Cross formation. Additionally, there are negative divergences in play on the MACD, Stochastics, and RSI.

Time will tell whether the European financials and the EUR/USD hold at current levels, or whether a pullback follows in these instruments, and, ultimately, in the European banks.

What Do The Complacency Odds Say?

2012-02-28T17:14:00.001-05:00

The 5-Year Weekly chart below shows a comparison of the S&P 500 Index to the VIX. We can see what can happen when price has traded around the levels at which they are currently situated. On each of the past four years, price has spiked rather quickly from these levels by large percentages on the VIX, sending the S&P 500 plunging.

The next 5-Year Weekly chart below shows the ratio between these two indices. The S&P 500 is at a major resistance level compared with volatility. No doubt we'll see whether history (this cycle) repeats itself over the next days/weeks.

With spikes occurring in four of the past five years from current levels, I'd say the odds of another spike this year are running around 80%...possibly sooner rather than later.

The Grass is Always Greener... ;-)

2012-02-28T13:37:00.002-05:00

Home Price Index Continues its Decline

2012-02-28T09:40:00.002-05:00

Data released this morning shows that the selling price of homes continues to decline, as shown on the graph below. Since it's a "leading indicator of the housing industry's health because rising house prices attract investors and spur industry activity," this only adds fuel to the unfolding story of slowing demand/growth in 2012.

Today's data confirms data released on February 23rd which also showed a decline in the purchase price of homes with mortgages backed by Fannie Mae and Freddie Mac, as outlined in my post of February 23rd. As you can see in that post, existing home sales also declined, according to data released on February 22nd...these sales are down at 2009 levels...not a healthy environment at the moment in the housing industry.

Durable & Core Durable Goods Orders Drop to 2009 Levels

2012-02-28T09:12:00.001-05:00

Data released this morning shows that Durable and Core Durable Goods Orders dropped considerably...down to 2009 levels, as shown on the graphs below.

Ones to watch for possible continuing weakness as a confirmation of slowing global growth in 2012. In the short term, this may take some of the steam out of the current equity market rally, as the futures markets dropped immediately following the release. In this regard, I've outlined where short-term support lies for the four e-mini futures indices (YM, ES, NQ & TF) in my post of February 27th.

Emerging Markets ETF versus BRIC Countries

2012-02-27T19:37:00.001-05:00

Below are a series of 2-Year Daily charts. I'll be comparing the current levels of the Emerging Markets ETF (EEM) with those of the BRIC countries for the purpose of determining relative strength of each.

The first chart is of the EEM. Price is currently in a trading range just below major resistance established in the first half of 2011 and just above major support established in the second half. There are negative divergences on the RSI, MACD, and ROC indicators, as well as declining volumes. Price is still subject to the influences of the existing bearish 50/200 sma Death Cross formation, and will be until such time as price breaks and holds convincingly above major resistance, and the moving averages cross to form a bullish Golden Cross pattern.

The next chart is of the Brazilian Index. Price is currently in a trading range just below major resistance established in early 2011, and just above a downtrend line from November 2010. There are negative divergences on the RSI, MACD, and ROC indicators. Price is subject to the influences of the existing bullish 50/200 sma Golden Cross formation.

The next chart is of the Russian index. Price is currently trading below major resistance established in the first half of 2011 and a downtrend line from April, and just above recent minor support. There are negative divergences on the RSI, MACD, and ROC indicators. Price is still subject to the influences of the existing bearish 50/200 sma Death Cross formation, and will be until such time as price breaks and holds convincingly above major resistance, and the moving averages cross to form a bullish Golden Cross pattern.

The next chart is of the Indian Bombay Index. After hitting major resistance, price has been dropping the past few days and is currently trading at major support established in 2011, and a downtrend line from November 2010. The RSI, MACD, and ROC have all turned down. Price is still subject to the influences of the existing bearish 50/200 sma Death Cross formation, and will be until such time as price resumes convincingly above the major support/resistance confluence level, and the moving averages cross to form a bullish Golden Cross pattern.

The next chart is of the Chinese Shanghai Index. Price has been rallying the past few days and is currently trading at major resistance established in 2011, and the downtrending 200 sma. There is a negative divergence on the MACD histogram and ROC, and the RSI has reached overbought territory. Price is still subject to the influences of the existing bearish 50/200 sma Death Cross formation, and will be until such time as price resumes convincingly above the major support/resistance confluence level, and the moving averages cross to form a bullish Golden Cross pattern.

The graph below shows the percentages gained/lost during this two-year period for all of the above indices and ETF.

Since the beginning of March 2010, Russia has gained the most, followed by EEM, and then India. China has lost the most, with Brazil losing about the same in percentage as India gained.

With the exception of Russia, EEM has outperformed China, Brazil and India by a considerable percentage, and is not an accurate measurement of how the actual BRIC indices have actually performed.

Inasmuch as price on all of these instruments is trading below major resistance in the presence of negative divergences on indicators, and (with the exception of Brazil) are still subject to the influences of bearish moving average Death Cross formations, we may see a pullback occurring at some point soon. I'd keep a close watch on Russia and China for indications of possible weakness developing which may also affect the other indices and ETF...India has already been dropping and may be the signal that the others will follow suit. Ones to watch over the next days/weeks.

TF is the Weak Cousin to the YM, ES & NQ

2012-02-27T18:00:00.001-05:00

Further to my post of February 11th, the YM, ES & NQ have advanced above the minor support levels that they had formed just before the latest unemployment data was released during pre-market hours on February 3rd. These e-mini futures indices rallied strongly (on high volumes normally seen during market hours, not during the pre-market session) immediately after that data was released before cash markets opened.

The TF also rallied on higher than normal pre-market volumes, but it has failed to advance above pre-market highs set that day.

As shown on the 4-Hour charts below, the uptrend remains intact for the YM, ES & NQ, while the TF is stuck in a trading range. The TF has re-tested the lows of this pre-market high-volume area five times now and rallied today, along with the YM, ES & NQ...all four e-minis rallied on increased volumes today.

Until such time as each of these four e-minis breaks and holds below this pre-market high-volume level, they have a chance of continuing their upward trek. The 23.6% Fibonacci retracement level is approximately in line with the highs of the pre-market high-volume rally on the YM, ES & NQ, and it is in line with the lows of the pre-market high-volume rally on the TF (the Fibonacci retracement begins from the lows of this year).

Below is a 1-Hour comparison chart of the Dow 30, S&P 500, Nasdaq 100, Russell 2000, Dow Transports, and Dow Utility Indices. It begins on February 3rd. As can be seen, the Nasdaq 100 is the leader in the rally from that date, with the Russell 2000 in negative territory, and Transports the laggard.

I'd look for any developing weakness in the Russell 2000, and a break and hold on the TF of its February 3rd pre-market high-volume level as a signal that the YM, ES & NQ may follow suit. Additionally, I'd look for a resumption of selling in Transports, as a confirmation (any further advance in Oil may have a negative impact on this index). Alternatively, a strengthening of the Russell 2000 and Transports should provide support for any further advance in the Dow 30, S&P 500, and Nasdaq 100 Indices.

As an aside, markets are watching to see whether the Dow 30 can recapture and remain above 13000 (which was hit again today but not held), and whether the S&P 500 can recapture and remain above its May 2011 high of 1370.58 (which was hit today but not held).

Money Flow for February Week 4

2012-02-24T20:17:00.003-05:00

First of all, I apologize for the length of my post, but I have plenty to say...I appreciate you allowing me my indulgence and intrusion into your time.

Further to my last weekly market update, here is a summary of where money flow ended for Week 4 of February, 2012.

The Weekly charts below of YM, ES, NQ & TF show that the YM, ES and NQ made a higher weekly close than the prior week, and that the TF made a lower weekly close...it's also the only one not to have made a higher weekly close in February since Week 1...one to watch for possible developing weakness. The NQ is climbing along its upper channel line resistance for the second week in a row.

The three Daily charts below show that Stocks Above 20-Day, 50-Day, and 200-Day Averages are still trading at or above near-term support levels...a lower support level was re-tested on the 20-Day Average chart and stocks bounced back up to close within this new support level. It will be important that these support levels be maintained on all three charts to confirm any further advance in equities...since it appears that weakness has set in on the 20-Day Average chart, it will be important, in the short-term, for stocks to rebound sooner rather than later, otherwise they risk further downside pressure.

The VIX fell by 4.84% this past week, as shown on the graph below...one to watch to see if equity strength continues, although it popped up on Friday as it sits just above major support at 15.00.

Oil was the big gainer in the Industry Groups for the week, followed by Biotech, Brokers, and Gold/Silver, as shown on the graph below. I've added the S&P 500 Index to the equation, and its gain, in comparison, was miniscule. Banks were the big losers.

As reflected above, the Energy Sector was the big gainer, followed by Technology, Consumer Staples, Healthcare, and Utilities, as shown on the graph below. Financials were the big loser. It would appear that the markets were moving to a more defensive position, compared with the miniscule gain in the S&P 500 Index.

As shown on the graph below, the Commodity ETF was the big gainer, followed by Emerging Markets, and the Chinese Financials ETF. The U.S. Financials ETF was the big loser, followed by the Agricultural ETF. Buying in the European ETF was miniscule (and was not reflective of the buying in the Euro), as was in the S&P 500 Index. Whether buying continues in Emerging Markets remains to be seen in the face of a potential move to defensive positions.

As shown on the graph below, Silver marginally outpaced buying in WTI Oil and Brent Crude Oil, followed by Copper and Gold. Gains made on the S&P 500 Index were miniscule in comparison. If the buying continues in the Chinese Financials ETF and Emerging Markets, and if it strengthens in the Major Indices, we may see Copper rise further.

As shown on the graph below, minor gains were made in the Major Indices, except for the Dow Transports (which lost for the third week running). There was minor buying in the High Dividend-Paying Stocks ETF, and comparatively higher buying in Emerging Markets and the Corporate Bonds ETF...with higher oil/gasoline prices looming, we'll see whether buying interest continues in these instruments.

As shown on the currency graph below, the Euro gained the most, followed by a slight rise in the British Pound and the Aussie $. The U.S. $ lost the most, followed by the Canadian $. If the buying continues in the Chinese Financials ETF, we may see the Euro rise further...however, we'll see what effect, if any, higher oil prices may have on the Euro. Also, since the U.S. $ did not lose as much as the Euro gained, we may see a firming in the price of the U.S. $ if oil continues to rise.

Since it seems to be all about Oil this week, I've put up a few more charts, and as a follow-up to what I was saying in my last post.

Brent Crude Oil closed at 125.47 (above major resistance), as shown on the Daily chart below.

WTI Light Crude Oil closed today at 109.45 (just below a minor resistance level of 110.00), as shown on the Daily chart below.

The Daily comparison chart of Brent to WTI Oil below shows that Brent reversed its decline against WTI today and closed back above support at 1.15, as shown on the chart below...it's the one to watch for continued leadership in further advancement of oil prices over the next days/weeks since it has broken above major resistance, and since WTI has run into minor resistance.

The Daily comparison chart of Brent Crude Oil to the S&P 500 Index below shows that Brent has run into a major resistance level. If the S&P continues to rise, it will be interesting to see if buying slows in Brent, or if it continues to rise, as well...if so, at what pace.

The Daily comparison chart of WTI Oil to the S&P 500 Index below shows that WTI is nearing a major resistance level. As above, if the S&P continues to rise, it will be interesting to see if buying slows in WTI, or if it continues to rise, as well...if so, at what pace.

The last graph below shows the widening spread between the S&P 500 Index and the 10-Year T-Note yield...the spread has been ever-widening and has reached an all-time high (since January 1999). Normally these move in tandem but started diverging in 2010...one of these will have to reverse at some point.

Next week (Wednesday) will see the release of the latest Beige Book data...also, on Wednesday, Ben Bernanke will be delivering the FOMC's semi-annual report to the House Financial Services Committee. As volatility approaches major support, as the spread continues to widen between the S&P 500 and the 10-Year T-Note yield, and with the Dow 30 pressing up against 13000 (but unable to close above), the S&P 500 approaching its 2011 high of 1370.58, the spike in Oil, and a month-end close mid-week, it should be an interesting (and possibly volatile) week.

Enjoy your weekend!

Brent Crude versus WTI Light Crude Oil

2012-02-23T20:22:00.003-05:00

Brent Crude Oil closed today at 123.62, as shown on the Daily chart below.

WTI Light Crude Oil closed today at 108.54, as shown on the Daily chart below.

The Daily comparison chart of Brent to WTI Oil below shows that Brent has been declining against WTI since early in February of this year.

The percentage comparison chart of Brent to WTI Oil below shows that, during this same one-year timeperiod, Brent has gained more overall in percentage than WTI.

Beginning on February 6th, WTI crossed above Brent Oil and has gained the most in percentage to date, as shown on the percentage comparison chart below, indicating a surge in interest in WTI.

Conclusions:

Brent Oil is trading at/just above major resistance
WTI Oil is nearing minor resistance around 110.00 and major resistance around 115.00
Brent:WTI recovered from a lower open and closed at a major support/resistance level today (1.14)...the next support level is 1.12, then 1.10
inasmuch as Brent may have topped out/be topping out, it will be interesting to see whether WTI continues to rise and at what pace compared to Brent...ones to watch over the next days/weeks

Existing Home Sales and Home Prices Decline

2012-02-23T11:21:00.001-05:00

Data released yesterday and today shows a decline in Existing Home Sales and in the Purchase Price of Homes with mortgages backed by Fannie Mae and Freddie Mac, as shown on the graphs below.

Perhaps home buyers are waiting for prices to bottom and become more in line with the low (2009) level of home sales.

Japan's Trade Balance at 12-Year Low

2012-02-20T14:48:00.001-05:00

Data released on February 19th shows another monthly drop in Japan's Trade Balance. As shown on the graph below, it's at a twelve-year low and shows no signs of reversal, although the "actual" figures were slightly better than those "forecast."

Further to my post of February 9th, Japan's Nikkei Futures Index has continued to rally (on increased volumes) and paused today and closed for a second consecutive day just above the overnight pre-market low that was made on the Monday after the earthquake in mid-March of 2011, as shown on the Daily chart below.

This index generally traded in between this level and 10000 until it plunged, along with the U.S. markets, after the U.S. credit rating downgrade in August by Standard and Poor's. In spite of three attempts, it failed to hold above the 10000 level at which it was trading before the earthquake hit.

Additionally, the USD/JPY forex pair has also been rallying and paused today just below 80.00 (a level that was supposedly agreed upon by the U.S. & Japan after the earthquake (see my post of April 22nd, 2011).

Today's Tokyo news article reports that the S&P "left its credit rating for Japanese government debt unchanged at AA-minus with a negative outlook."

Inasmuch as there is a very large negative divergence in economic data for Japan and recent market/currency movement, we're left with two important levels to be watched over the coming days/weeks relative to both to see if they can be held (maintained in the case of the Index, and, first of all reached, then maintained in the case of the currency). Whether Japan's recent enhanced monetary easing activities will actually succeed in reducing that divergence in due course remains to be seen.

On This Day...February 20th...

2012-02-20T11:21:00.000-05:00

On this day...

From the United Nations:

The General Assembly proclaimed 20 February as World Day of Social Justice in 2007, inviting Member States to devote the day to promoting national activities in accordance with the objectives and goals of the World Summit for Social Development and the twenty-fourth session of the General Assembly. Observance of World Day of Social Justice should support efforts of the international community in poverty eradication, the promotion of full employment and decent work, gender equity and access to social well-being and justice for all.
Declaration on Social Justice for a Fair Globalization

..."justice for all."

On This Day...February 19th...

2012-02-19T11:54:00.001-05:00

On this day...

From Wikipedia:

1846 – In Austin, Texas the newly formed Texas state government is officially installed. The Republic of Texas government officially transfers power to the State of Texas government following Texas' annexation by the United States.
Facts about Texas...

Money Flow for February Week 3

2012-02-18T14:14:00.001-05:00

Further to my last weekly market update, here is a summary of where money flow ended for Week 3 of February, 2012.

The Weekly charts below of YM, ES, NQ & TF show that all four made a higher weekly high than the prior week, but the TF was the only one that didn't make a higher weekly close, so far, in February. The NQ has reached a confluence of Fibonacci and upper channel line resistance...one to watch for either a breakout higher or a retracement.

Overlayed on the Daily charts below of YM, ES, NQ & TF is a Monthly Volume Profile POC (yellow horizontal line). This POC level is roughly in line with the highs achieved on February 3rd, the day on which these markets rallied on unusually high pre-market volumes when the latest unemployment data was released...I wrote about this in my post on February 11th. I'd put near-term support at this POC level...the TF closed on Friday just above and will be the one to watch for either developing weakness or a burst in strength.

The three Daily charts below show that Stocks Above 20-Day, 50-Day, and 200-Day Averages are still trading either at or above near-term support levels...a lower support level was tested on the 20-Day Average chart and stocks bounced back up to close just above prior support. It will be important that this level be maintained on all three charts to confirm any further advance in equities.

The VIX fell by 6.62%, as shown on the graph below...one to watch to see if equity strength continues.

Unlike the previous week, most Industry Groups gained on the week, except for Biotech and Gold/Silver, as shown on the graph below.

While the previous week was mixed, all Sector ETFs gained on the week, except for Industrials, as shown on the graph below.

The Commodity, Agricultural, and Financials ETFs did an about-face from the previous losing week and all gained on the week, as shown on the graph below. As can be seen, the Chinese Financials ETF (GXC) was the big winner.

As an aside, I wrote about the big drop in foreign direct investment in China in my post on February 15th, as well as the Shanghai Stock Exchange Index. The 5-day intraday chart below shows that traders managed to close this index just above the near-term support level of 2350 on Friday...a level to watch. Furthermore, a fellow trader posted this Bloomberg article on Slope of Hope this morning...so, perhaps the Chinese were buying their own Financials ETF and keeping the Index propped up. In this regard, it would be also be worth tracking the European Financials ETF (EUFN) above to see whether buying continues in both of these ETFs.

As shown on the graph below, Oil was the big winner again for a second week in a row, while Copper continued to lose. Much more weakness in Copper could produce a drag on any further advance in equities...one to watch.

The Daily chart below shows that Oil closed above the 104.00 level on Friday. A hold above this level could see price retest the prior swing high of 114.83, and ultimately 131.00ish (a potential IH&S target).

As shown on the graph below, the Major Indices gained on the week, except for the Dow Transports (for the second week running), and a minor drop in the High Dividend-Paying Stocks ETF (DVY) (also for the second week running). Any further drop in Transports could begin to produce a drag on the equity markets, particularly if it falls and holds below its 50 sma, as shown on the chart below.

As shown on the currency graph below, the U.S. $ gained the most, followed by the British Pound and Canadian $, while the Euro lost the most (an about-face from the prior week), followed by the Aussie $. Another reason to watch the price of Oil, as well as to see whether buying continues in the Chinese and European Financials...to see the resulting effect on the Euro, as well as on the equity markets, in general.

Since this past Friday was Options Expiry Friday, I'll post the chart below of YM, ES, NQ & TF. Each candle represents a one-Month options period. As can be seen, all four closed the current candle higher than the prior OPEX period. With Bollinger Bands widening, there is still more upside potential. Provided that price can remain above their Monthly POC, as I mentioned above, there is a good chance that the March OPEX (March 16th) will see a higher close, as well. With the next FOMC meeting coming up on March 13th, and barring any shock news events, that may very well occur. However, with the tepid rise on the YM on this last candle, I'd like to see buying commitment increase in this index, and to resume in the Dow Transports Index, in order to confirm any further buying in the other indices.

A Percentage Comparison of the Major Indices

2012-02-16T18:52:00.000-05:00

In total, from the October 2011 lows, the Russell 2000 Index has led the Dow 30, S&P 500, and Nasdaq 100 indices higher in terms of percentages gained to date, as shown on the percentage comparison chart below.

The next chart shows percentages gained since the November dip/lows. The Nasdaq 100 started to gain momentum towards the end of January and pulled ahead of the Dow and S&P 500, while the Russell maintained its lead.

The next chart begins at that point where the Nasdaq pulled ahead...it then pulled ahead of the Russell on February 8th.

The next chart begins on Monday this week...the Nasdaq surged once again on Wednesday, and, as of today's close, it remains the leader, so far, for the week, followed by the Russell 2000, the S&P 500, and the Dow 30.

In summary, I'd watch for any early signs of weakening in the S&P 500 and the Dow 30 indices, as a potential warning that equities may be about to roll over. The last chart depicts today's action only...price flattened out around 1:30pm on all four indices, with the Russell leading the indices higher from the open today. I'd look for a resumption of buying tomorrow, otherwise, this afternoon's flat price action may be a precursor of such weakness developing.

Big Drop in Foreign Direct Investment in China

2012-02-15T23:21:00.000-05:00

Data released in post-market hours tonight shows a big drop (which has dipped into negative territory) from the prior month's release, in foreign direct investment in China, as shown on the graph below.

We'll see if 2350 holds as near-term support on the Shanghai Stock Exchange Index, or whether price falls back to the the 50 sma at 2272, as shown on the Daily chart below.

1260/50 in the Cards for S&P 500 Index?

2012-02-15T18:35:00.001-05:00

Possible scenario for the S&P 500 Index...it drops and holds below the Weekly consolidation level of 1340ish, as shown on the chart below, down to a Fibonacci and price confluence level of 1260/50 to form a potential right shoulder of an IH&S pattern or the handle of a cup & handle pattern before resuming its upward trek.

Probable scenario? Time will tell...

Where's the Actual Value in the Homebuilders' ETF?

2012-02-15T18:02:00.001-05:00

Data released today showed an increase in home builders' sentiment with respect to current and future single-family homes, as shown on the graph below.

However, as I discussed in my post of January 26th, new home sales still remain depressed at the lows of the 2009 levels where they've been since their decline began in 2006.

Contrary to actual sales data, the Homebuilders ETF, XHB, is trading up from its 2009 lows, and has bounced by almost 33% since its decline began in 2006 (see the Monthly chart below)...a difference of a gain in value of 33% versus the 0.00% gain in actual new home sales since 2009...makes me wonder what's driving the price of this ETF and whether it has actual value, particularly sustainable value.

As can be seen, price is sitting in the vicinity of Fibonacci and price confluence resistance and is currently held below that level in a trading range. I'd be skeptical of any breakout to the upside (and would question its sustainability) without seeing a dramatic and steady improvement in new home sales to back it up.

This confirms what I concluded in my post on January 31st.

Happy Valentine's Day from S&P 500

2012-02-14T19:50:00.001-05:00

Happy Valentine's Day from Smudge!

2012-02-14T12:06:00.003-05:00

http://infographiclist.com/2012/02/07/valentines-day-by-the-numbers-infographic/

http://en.wikipedia.org/wiki/Valentine%27s_day

Bears Beware! Bulls Beware!

2012-02-11T19:08:00.001-05:00

Further to my last post, I'd offer a caution to bears from getting over-eager on shorting the equity markets while they remain above minor support levels that the YM, ES, NQ & TF had established just before the latest unemployment data was released during pre-market hours on February 3rd. These e-mini futures markets rallied strongly (on nearly-normal-market-hour volumes, which I thought was unusually high) immediately after this data was released before cash markets opened.

Based on this "unusual pre-market volume" surge factor, I'd submit that short-term support sits at those "pre-release levels." Overlayed on the 4-Hour charts below is a Fibonacci retracement taken from the January lows to the current highs, as well as Bollinger Bands, 50 sma (red) and 200 sma (pink).

As can be seen, the YM, ES and NQ have not yet re-tested that "pre-release level," while the TF almost has and closed just above on Friday. This level for the YM and ES sits roughly in line with the 33% level (yellow) (12671 and 1322, respectively)...although it's not a traditional Fibonacci level, it represents the upper one-third marker of the rally for that defined time period and has merit as an area of support. The level for the NQ and TF sits roughly in line with the 23.6% Fibonacci level (light pink) (2503 and 808.50, respectively).

Until this "pre-release level" is crossed with conviction on decent volumes and held to the downside, I'd say it offers short-term support for these e-mini futures indices. Based on this analysis and the defining parameters, the "given" for any support levels beneath that level would be represented by subsequent Fibonacci levels, as shown.

On the flip side, any further advance above this level on decreasing volumes could be a bull trap in-the-making.

Money Flow - February 6-10, 2012

2012-02-11T12:56:00.001-05:00

Further to my last weekly market update, here is a summary of where money flow ended for Week 2 of February, 2012.

First of all, the Weekly charts below of YM, ES, NQ & TF show that the week ended with some profit-taking after an attempt at a further rally. I would suggest that the lows of this past week's candles are important support levels to watch, for the following reasons.

The three Daily charts below show that Stocks Above 20-Day, 50-Day, and 200-Day Averages pulled back to near-term support levels...important ones to watch over the coming days/weeks.

The VIX rose by 17.06%, as shown on the graph below.

Most Industry Groups lost on the week, except for minor gains in Internet and Biotech, as shown on the graph below.

Of the Sector ETFs, Materials lost the most, while Technology gained the most, followed by Consumer Staples, Utilities, and Consumer Discretionary, as shown on the graph below.

As shown on the graph below of a variety of ETFs, Agricultural Commodities lost the most, followed by Emerging Markets, European Financials, U.S. Financials, and Chinese Financials, while Commodities as a whole remained relatively flat.

As shown on the graph below, Oil gained the most, followed by Gold, and Copper lost the most, followed by Silver.

As shown on the graph below, the Russell 2000 Index lost the most, followed by Dow Transports, Emerging markets, Dow 30, S&P 500, and the Corporate Bond ETF (JNK). The Nasdaq 100 gained the most, followed by minor gains in the High Dividend-Paying Stocks, ETF (DVY), and Dow Utilities.

As shown on the currency graph below, the Euro gained the most, and the Aussie $ lost the most, followed by the Canadian $ and the British Pound. The U.S. $ also gained slightly.

I would generally conclude from these graphs that:

firstly, the VIX is an important index to watch to see if volatility continues to gather momentum, signalling further equity weakness
it will be important that the support levels on Charts 2, 3 & 4 are maintained if the equity bulls are going to resume their advance from here
while Technology finished strong on the week, I'd keep an eye on the NQ, as discussed in my February 9th post, and on AAPL, as discussed in my February 10th post, for any signs of developing weakness which may drag equities down
Small-cap stocks, Emerging Markets, and Transportation took the biggest hit last week and were the most affected by the rise in volatility...ones to watch for accelerating declines if volatility continues to rise
any further drop in the Commodities sector could produce a drag/reversal on equity markets
any further drop in the U.S., European, and Chinese Financials sectors could produce a drag/reversal on equity markets
since the U.S. $ gained on the week, as well as the Euro, further commitment will be required by currency buyers in the coming days/weeks to produce clarification on which currency they will place their trust

The AAPL of Nasdaq's Eye

2012-02-10T11:02:00.002-05:00

AAPL is one of a very few Nasdaq stocks in the green, so far, today. At the moment, it's trading at the +2 deviation of an uptrending regression channel following a large volume spike on yesterday's price action, as shown on the Daily chart below. As it approaches the 500 level, the indicators are pointing to an overbought situation...price may ultimately revert to the channel "mean."

This may be what the NQ is waiting for before it pulls back by any significant amount, as I discussed in my February 9th post.

Consumers Spend Less and Expect Lower Prices

2012-02-10T10:29:00.000-05:00

Data released today indicates that consumers are spending less as they anticipate lower prices, as shown on the two graphs below.

The same can be said of world demand on U.S. goods, as figures released today show a drop in Trade Balance, as shown on the graph below.

The only logical conclusion that I can draw from this is that higher prices will equate to even lower demand by both U.S. consumers and global markets.

Watching Japan's Nikkei Futures Index

2012-02-09T20:46:00.001-05:00

Data released tonight showed another monthly decline in CGPI y/y (change in the price of goods sold by corporations) in Japan. This level is approaching zero and is in danger of falling into negative territory, as it did in 2009.

Since it's a leading indicator of consumer inflation, this suggests that Japan's inflation is teetering on deflation...one to watch for future month's releases.

The Daily chart below of Japan's Nikkei e-mini futures index, NKD, shows that price has pushed above a major downtrend line from the July 2007 high (broken green) and has stalled today at the declining 200 sma (broken pink). Price is sitting just below 9100 (red), which represents price resistance, through which it declined on August 8th, 2011, the Monday after Standard and Poor's downgrade of the U.S. credit rating.

It will be interesting to see if near-term support holds at 8910ish or if near-term resistance holds at 9100...a solid break and hold below/above these levels on sustained volumes should set up the next move for this index.

Imminent Tech and Dow Transports Roll-over?

2012-02-09T19:41:00.001-05:00

Below is a Daily chart of NQ. Overlayed are a number of lines, particularly a "pink diamond" formation that occurred during the first one-third of 2011, Fibonacci fanlines, several trendlines, and price levels.

Eventually the diamond broke to the downside and dropped to almost an identical level in height to that of the diamond (broken pink lines), nearly touched the 127.2% Fibonacci fanline (yellow), and pierced an extension of one of the diamond trendlines.

Price is approaching a similar measured move which, if it reaches it, would take it to 2616.50, where it would first be met by the 78.6% Fibonacci fanline (broken purple), and then up several points to 2620.25 which is the same height as that of the diamond. Should price pull back from that level, near-term support is back down at the top of the diamond at 2403. 50% of that move would take it down to 2500ish.

Inasmuch as the Nasdaq 100 is leading in terms of percentage gained so far on price action this week, and Dow Transports is the biggest loser, as shown on the percentage comparison graph below, it may be worthwhile keeping an eye on Transports as the MACD and Stochastics are signalling a possible roll-over, as shown on the Daily chart below.

Two indices to watch for potential weakness...

BOO!

2012-02-08T19:25:00.001-05:00

EEM (Emerging Markets ETF) is on my "BOO-watch" radar as it approaches gap-resistance at 44.36 and forms the right shoulder of a very large H&S pattern, as shown on the Daily chart below.

Meanwhile, EUR/USD trades at price and trendline confluence resistance, as shown on the Daily chart below.

And Greece is...

Markets Becoming More Defensive?

2012-02-07T19:23:00.002-05:00

Below are a series of percentage comparison graphs of a number of markets. They compare money flow between the first week in February and so far this week.

The first graph depicts gains made for the Major Sectors during the first week in February. The Financials sector made the biggest gains that week, with no losses for any sector.

The second graph depicts gains/losses made for these Major Sectors so far this week. Note the drop in the Financials, Industrials and Materials sectors, and the increase in the Utilities and Health Care sectors...indicating a preference for more defensive stocks so far this week.

The third graph depicts gains/losses made for the Major Indices, DVY, EEM, Gold, Oil, Copper, and JNK during the first week in February. There was notable buying in EEM, DVY, and the Russell 2000, moderate buying in the Dow 30, S&P 500, Nasdaq 100, and Copper, and tepid buying in JNK. There was selling in Gold and Oil.

The fourth graph depicts gains/losses made for these same markets so far this week. There was a marked increase in buying in Gold and Oil, while the Russell 2000 and Copper sold off into negative territory. Buying in the other markets continued this week, but to a greatly reduced extent. This indicates a reduced appetite in risk for equities and a greater desire for Gold and Oil (perhaps as a hedge against a potential downturn in the equities markets as they battle against some major resistance levels).

The fifth graph depicts gains/losses made in a variety of currency markets during the first week in February. The biggest gainer was the Aussie Dollar, with the U.S. Dollar declining. There was moderate buying in the Canadian Dollar and the British Pound, and mild buying in the Euro.

The sixth graph depicts gains/losses made in the same currency markets so far this week. The Euro garnered the most interest, with continued buying in the Aussie Dollar and the British Pound, and a much-reduced interest in the Canadian Dollar. The U.S. Dollar continued its decline...however, I would note that in both Week 1 and so far in Week 2, the U.S. Dollar hasn't declined percentage-wise to the same extent that all the others have gained...it appears to be holding up, so far, in February...will see if this continues to the end of this week, or not.

I'll look at these graphs again this weekend to see how these markets performed in February's Week 2 as compared with Week 1 and where the money flow ended up this week, and how the U.S. Dollar fared in comparison with other currencies.

German Industrial Production Down at 2009 Levels

2012-02-07T12:33:00.001-05:00

Data released today shows a sharp drop in German Industrial Production well into, once again, 2009 levels, as shown on the graph below. Production has been in a general downtrend since its peak in 2010.

Although U.S. Economic Optimism has been increasing, as shown on the graph below and according to data released today, it has rarely been above the 50 level since January 2007...so consumers' confidence is still on the pessimistic side of the scale.

Keeping an Eye on NYSI and S&P 500 Index

2012-02-06T20:03:00.002-05:00

An Index that I'll be watching over the next couple of weeks is the NYSI (NYSE Summation Index) relative to its Stochastics. When the Stochastics cycle has peaked and crossed over on a Weekly timeframe, as shown on the chart below, and when NYSI reaches/approaches its weekly cycle high, this can be a signal that the S&P 500 Index is reversing or about to reverse.

For a live image of this chart, please click here.

Close Fumbles in the Markets

2012-02-03T23:34:00.001-05:00

This Coca-Cola commercial for this Sunday's Super Bowl game reminds me of the markets...

...as the bulls (secretly disguised as one thirsty NY bear) pushed the markets higher from their 2011 lows, while nearly fumbling and losing control of the ball several times, to score yet another higher weekly close.

Further to my posts of January 27th and January 28th, equity bulls' "sweet tooth for risk" got sweeter as shown on the following Weekly charts of YM, ES, NQ & TF. They succeeded in their mandate this week of boosting the ES higher and propping up YM, while continuing to buy NQ and TF.

The ES and TF have closed at Fibonacci Extension and channel "mean" confluence resistance, while YM is still below that same scenario, and the NQ is below Fibonacci Extension and upper channel confluence resistance (Technology is clearly the leader in this push up from December 2011).

Whether the ES and TF break above their respective resistance levels to continue a move upwards next week remains to be seen...indices to watch for hints of either continued strength or an onset of weakness.

The charts and graphs below show where money flowed, firstly, from the beginning of 2012, and, secondly, during the course of this week. I've added JNK, the High Yield Corporate Bond ETF, to the equation since my January 27th post.

The first chart and graph show heavy buying of equities, Emerging Markets (EEM), Gold, and Copper during the course of January and into today's close, except for tepid buying in the High Dividend-Paying Stocks ETF (DVY) and the Corporate Bond ETF (JNK), and a pullback in Oil.

The last graph depicts buying/selling for this week. Proportionally, buying has continued to a similar degree as over the past month, except for a slight rise in DVY-buying, and except for a considerable drop in Gold-buying, as well as reduced buying in Copper and JNK, and a reduction in Oil-selling.

While risk-appetite seems to remain in force, it may be worthwhile keeping an eye on:

Copper and JNK to see if further weakness sets in and, potentially, produces a drag on equity-buying,
EEM and the Russell 2000 to watch for any signs of reduced buying interest to confirm the above point,
increased buying in DVY as a potential hedge against equity weakness,
increased buying in Gold as a potential hedge against equity weakness, and
increased buying in Oil as a potential hedge against equity weakness

Finally, I'll leave you with this little tidbit concerning MF Global, which hasn't attracted much attention this week...will see where the money trail ends...

Enjoy the game...

Conflicting Business/Manufacturing Data

2012-02-03T10:25:00.001-05:00

It appears that even though business purchasing managers rate the level of business conditions higher, according to data released today, actual purchase orders placed with manufacturers has declined, as shown on the graphs below.

Higher expectations does not automatically mean higher demand.

An Odd Divergence on Unemployment Data

2012-02-03T09:06:00.005-05:00

Data released today shows that the unemployment rate continues to rise in Canada, while it declines in the U.S., as shown on the graphs below.

I'd imagine that will affect cross-border shopping as it means that more Americans should be purchasing Canadian goods and fewer Canadians purchasing American goods, particularly as the USD/CAD currency is trading around parity. Perhaps the Canadian government's austerity measures are working to the detriment of employment, as they enforce policies to eliminate the budget deficit by 2015. With the expected softening of global growth for 2012, I don't see that number improving for the foreseeable future.

Six More Weeks of Winter...

2012-02-02T13:37:00.002-05:00

This Washington Post article says we're in for six more weeks of winter, since Groundhog Phil saw his shadow today in Punxsatawney, Pennsylvania. Wrap up...

Lacklustre Data Releases

2012-02-02T12:53:00.001-05:00

Data released today shows:

a drop in Britain's Construction PMI
a rise in U.S. Job Cuts
a drop in U.S. Unemployment Claims (which are still at higher average levels than from 2000 to 2009)
a sharp drop in U.S. Nonfarm Productivity
a sharp rise in Unit Labour Costs

as shown on the graphs below.

So, basically, we have a situation of fewer people being less productive at higher company costs in the U.S. and a continuing drop in Britain's business conditions. These figures do not bode well for a healthy business environment for either country that would support sustainable growth, without increasingly higher inflation in the short, medium, and long term, in my opinion.

A Quick Update on TF

2012-02-01T18:04:00.000-05:00

The only chart I'll be commenting on tonight is this 4-Hour chart of TF. Price is currently trading at a resistance level of an intersection of the the top of a "minor" uptrending channel and the lower one-quarter of a larger uptrending channel. It's also approaching another confluence resistance level at 813.20 of its 78.6% retracement level from its May 2, 2011 high to the October low and the lower one-third of the "senior" channel level.

At these levels, it's also beginning to trade in overbought territory according to my very short-term RSI indicator reading, so price may pull back somewhat before making its next move. At the moment, momentum is favouring the bulls, and near-term support sits at a confluence level of 780.00-785.00, comprised of the lower level of both channels and the upper one-third level of the Fibonacci retracement.

my-Cloud

2012-02-01T16:26:00.003-05:00

I came across this little tidbit in my local "Coffee News" today...

"When the 2022 World Cup is held in the Middle Eastern country of Qatar, fans won't be bothered by the intense sun and high temperatures. That's because scientists in that country have designed artificial clouds that will provide shade and lower the temperature inside the stadium. Solar-powered air conditioning will be supplemented with the clouds, which are made from a light-weight carbon structure that carries helium gas. FIFA president, Sepp Blatter, had originally said the tournament should be held in the cooler months, but is now convinced the scientists have come up with a good solution to beat the heat."

This news was reported in 2011 by the BBC in this article, along with a video showing how it would work.

As someone who's not a fan of heat, I hope they eventually create a "port-a-cloud" version for individual use that I can carry in my pocket and deploy it when the heat's on!

Manufacturing and Construction Data Up From 2011 Lows

2012-02-01T12:56:00.002-05:00

Data released last night and today shows a small improvement in the Manufacturing PMI Indices in China, Europe, Britain, and the U.S., and a small improvement in Construction Spending and Manufacturing Prices in the U.S., as shown on the graphs below.

Since the last several months' worth of data has bounced a bit after large declines in 2011, it will be worth noting whether the weak trend is actually ending and strengthening into 2012, or whether this is just a blip before further weakness settles in.

EUR/USD on My "Negative Watch" Radar

2012-01-31T18:51:00.001-05:00

A break and hold below current price could get very interesting on the short side on the Weekly chart below of EUR/USD. It's on my "Negative Watch" radar...

How YM, ES, NQ & TF Closed in January, 2012

2012-01-31T18:12:00.001-05:00

Below are 5-year Monthly charts for YM, ES, NQ & TF. All four e-mini futures indices closed in between their upper and middle Bollinger Bands on this timeframe. The YM and ES are in the thick of resistance, while the NQ has broken above, and the TF is approaching overhead resistance. Bollinger Bands are beginning to tighten slightly on YM, ES and NQ, suggesting a possible reversal of the advance at some point. Price has closed above the 5-year Volume Profile POC for all four e-minis. Volumes were lighter this month and have declined steadily since peaking in August of 2011. My very short-term RSI indicator is nearing overbought conditions for this timeframe.

Below are 20-day 4-Hour charts for YM, ES, NQ & TF. We can see the steady rise in price from the beginning of January. The NQ & TF made a new swing high in pre-market trading today, while the YM & ES have made progressively lower swing highs over the past four days...none of them has made a new swing low yet. Today's initial drop from 9:00 am was made on considerably higher volumes on all four e-minis...whether this is the beginning of a bear pullback remains to be seen. Near-term support sits at the lower Bollinger Bands, followed by their respective next lower Fibonacci retracement level...that would be the 60% level for YM, 50% level for ES, and 38.2% for NQ & TF. My very short-term RSI indicator is nearing oversold conditions for this timeframe, but it is very sensitive to minor corrections and can be easily relieved by minor price corrections before a trend resumes.

Question #1 from my post of January 30th has been answered, in part, as the ES closed above a moving average Golden Cross formation on the Daily chart...time will provide the answers to the rest of that question, as well as to the other two.

In the near term, we'll see whether the NQ and TF can continue a strong push up for February from here, with the YM and ES finding support to follow. Important sectors to watch in support of such an advance would be the High Dividend-paying Stocks ETF (DVY) and Emerging Markets ETF (EEM). As mentioned in my post of January 23rd, they are both facing a great deal of resistance at their current levels, and a push above would be at a considerable risk-to-reward ratio. In my opinion, we'd need to see higher volumes come in and stay on all these Indices and ETFs to confirm that a sustainable advance was viable in the face of such a high risk/reward scenario.

Simple Logic...;-)

2012-01-31T12:02:00.001-05:00

House Prices Still Under Water

2012-01-31T10:38:00.001-05:00

Data released today shows that house prices fell from the prior month's level and still remain in negative territory, as shown on the graph below. Since it's a "leading indicator of the housing industry's health because rising house prices attract investors and spur industry activity," the weak price levels just confirm the depressed state of new home sales, as mentioned in my post of January 26th.

The Daily chart below of the Homebuilders ETF, XHB, shows negative Stochastics and MACD divergence and that a topping process may be underway. Near-term support sits, first, at the confluence level of monthly Volume Profile POC and monthly VWAP of 18.58, and then at the -2 monthly VWAP level of 17.65. Near-term resistance is at the +2 monthly VWAP level of 19.50.

As this ETF has had a strong run from its October 2011 lows, it remains to be seen as to whether it runs out of favour on the buying side any time soon.

The Monthly chart below shows that this ETF has been slow to recover from highs made in 2006, and has made a rough triple top formation, beginning from the April 2010 highs. Resistance on this timeframe sits at a Fibonacci confluence of level of 20.00...a very important level for the bulls to break above and hold. However, with data like we've seen of late, it makes such a bull case very weak, in my opinion, and I would not look to this sector to lead the general markets higher.

3 Important Questions for YM, ES, NQ & TF

2012-01-30T18:35:00.001-05:00

Further to my post of January 28th, which focused on Weekly charts, I'll take a closer look at near-term support and resistance levels on the shorter Daily timeframe for YM, ES, NQ & TF, as shown on the charts below.

Overlayed on each chart are Bollinger Bands, monthly Volume Profile POC (horizontal yellow lines), 50 sma (red), 200 sma (pink), and a Volume Profile for the one-year period (POC is red horizontal line).

Price on YM is currently trading in between its upper Bollinger Band and middle Bollinger Band, above both POCs, and above both moving averages (which are in a bullish Golden Cross formation). Using these parameters, I'd put near-term resistance at 12761, and support at, first, 12499, then 12377, and, finally, 12195 (one-year POC).

Price on ES is currently trading in between its upper Bollinger Band and middle Bollinger Band, above the current month's POC, immediately below the one-year POC, and above both moving averages (which are are forming a bullish Golden Cross pattern as tomorrow's candle begins to form in after-hours trading...an important formation to watch for completion in tomorrow's close). Using these parameters, I'd put near-term resistance at, first, 1311 (one-year POC), then 1328, and support at, first, 1303.75, then 1297.25, and, finally, 1266.50.

Price on NQ is currently trading in between its upper Bollinger Band and middle Bollinger Band, above both POCs, and above both moving averages (which are in a bullish Golden Cross formation). Using these parameters, I'd put near-term resistance at 2493, and support at, first, 2431.75, then 2404, and, finally, 2317.75 (one-year POC).

Price on TF is currently trading in between its upper Bollinger Band and middle Bollinger Band, above its current month's POC, below its one-year POC, and above both moving averages (which are still under the influence of a bearish Death Cross formation). Using these parameters, I'd put near-term resistance at, first, 804.70, then 823.10 (one-year POC), and support at, first, 770.80, then 760.90, and, finally, its lower Bollinger Band at 736.90.

In conclusion, three important questions worth monitoring over the coming days relative to these charts are:

Can the moving average Golden Cross that is forming in after-hours trading today remain intact on ES after tomorrow's close, and in the days ahead? (This question is pertinent to the conclusion in my January 28th post, which was that the bulls will need to focus on boosting ES higher if they are going to keep the upward momentum in play, as well as to break and hold above the major downtrend line from the 2007 highs.)
Can TF can, ultimately, push high enough over the coming days to reverse its Death Cross to a Golden Cross, and, subsequently, push and remain higher above the one-year POC?
Can bulls maintain price above the current month's Volume Profile POC on all four e-mini futures indices, particularly as February's trading action commences on Wednesday, in order to, potentially, keep this rally moving up to form a higher monthly POC for February?

Consumers Buying Less But Paying More

2012-01-30T11:27:00.000-05:00

Data released today shows that consumers are buying less, but paying more, even though their personal income has risen, as shown on the three graphs below.

Consumer personal spending has been, generally, declining since it peaked in August 2011. Since "consumer spending accounts for a majority of overall economic activity, and is one of the most important gauges of economic health," it remains to be seen whether this will have any effect on the buying mindset of the equity markets that has been in play for the past couple of months.

12800 "Touchdown" Made on Dow 30

2012-01-29T16:23:00.001-05:00

Further to my post of January 20th, the Dow 30 has finally made its "touchdown" as it hit 12800 last Thursday...this play is now complete.

The next play has yet to become clear, as price failed to hold above this level, as shown on the updated Daily chart below. Therefore, 12800 is still resistance and support is 12600. However, it is still in uptrend on this timeframe, so current momentum is with the bulls. Additionally, price has closed and held, so far, above the downtrending green line, which is taken from its 2007 high...since this trendline sits around 12600 now, I'd say that this level has become increasingly important for the bulls to maintain as support from this point, if they're going to launch an all-out rally in the coming days.

This conclusion is in keeping with the observations made in my posts on January 27th and January 28th.

One to watch!

In Search of "Truth" in the Markets...A Trader's Edge

2012-01-29T15:08:00.001-05:00

If I ask myself, "What is the truth about this situation?" and if I'm truly open to hearing the answer, I'll get the right answer. I may not like the answer, but it will be the right one. Truth in action represents reality.

As a trader, I can only take this to mean that I should ask myself, "What does the market think about this situation?"...that will show me the overall reaction of the market, and, since the market generates more force than I do, it doesn't matter what I think of the situation. It seems to me that the "truth" in trading, lies therefore, in how the markets are trading this situation, and not necessarily what the situation is (since the situation itself may be based on false information/perceptions/interpretations).

A trader's edge lies in being able to "feel" what the market flow is and get on board at the appropriate time...not an easy task. It really boils down to how good an "interpreter" I am at any given point in time of market action, not how good/bad I judge the situation to be.

So, on to another day of my life-long studies in "Market Interpretation 101"...

When Life Gets Sour...

2012-01-29T10:22:00.001-05:00

...just add cherry syrup! =^.^=

How YM, ES, NQ & TF Closed the Week of Jan. 23-27, 2012

2012-01-28T12:25:00.001-05:00

Here's how Week 1 closed on January 27th for YM, ES, NQ & TF. This was the week of the FOMC announcement to keep interest rates low until the end of 2014. As I mentioned in my post of January 25th, these four e-min futures indices have been travelling upward in a channel from their 2011 lows.

The first Weekly chart below shows that YM took a slight loss from the prior week after attempting new highs, but closed just above a confluence of 3 trendlines (one from the highs of 2007), a 78.6% Fibonacci extension level, this month's Volume Profile POC (horizontal yellow line), and the lower one-quarter of the channel on higher volumes than the prior week. Current price sits well above its 50 sma (red). The weekly uptrend hasn't been broken yet for YM.

The second Weekly chart below shows that ES made a very slight gain from the prior week after attempting to break above the downtrend line from the 2007 highs, but closed just above a confluence of 2 trendlines, a 78.6% Fibonacci extension level, this month's Volume Profile POC, and the lower one-quarter of the channel on higher volumes than the prior week. Current price sits well above its 50 sma. The weekly uptrend hasn't been broken yet for ES.

The third Weekly chart below shows that NQ gained on the week and retreated slightly, after touching its upper Bollinger Band and upper one-quarter of the channel, and after nearly hitting its 78.6% Fibonacci extension level. It closed well above its channel "mean" (broken green line), well above this month's Volume Profile POC, and above last year's high of 2435.50 on higher volumes than the prior week. Current price sits well above its 50 sma. The weekly uptrend hasn't been broken yet for NQ.

The last Weekly chart below shows that TF gained on the week and closed near its high and very slightly above its 78.6% Fibonacci extension level on higher volumes than the prior week. Current price sits in between the channel "mean" and lower one-quarter of the channel and above this month's Volume Profile POC and 50 sma. The weekly uptrend hasn't been broken yet for TF.

In conclusion, it appears that the bulls need to focus on boosting ES higher, while keeping YM propped up, as well as to keep buying Copper, as mentioned in last night's post, if they are going to keep this upward momentum in play on these indices, as well as break and hold above the major downtrend line from the 2007 highs. This re-enforces what I said in that post.

I'll take a look at these charts on a Weekly basis

to get a "big picture idea" of where price is

relative to this week's FOMC announcement...stay tuned for Week 2!

Are Markets Preparing for a Bullish Christmas Tea Party?

2012-01-27T19:08:00.001-05:00

Have the markets started building 2012's chocolate cake for a bullish Christmas tea party? Let's see what foundations have been prepared for the first layer, so far, in January. The following charts and graphs will help me to illustrate this possible scenario.

I'll take a look at these charts and graphs on a

weekly basis to give me an idea

where we may be in the assembly of this chocolate fantasy.

The problem with this analogy is that now I really want a piece of cake!

The chart and histogram graph below show a percentage comparison of price action from January 3rd to today's close of the Major Indices, the high dividend-paying stocks ETF (DVY), the Emerging Markets ETF (EEM), Gold, Oil, and Copper.

The Nasdaq 100, Russell 2000, Emerging Markets, Gold, and Copper have been strong players for the month, while the S&P 500 and Dow 30 have followed suit, albeit to a lesser extent. The high dividend-paying stocks have barely budged, and Oil has dropped.

The next graph depicts percentages gained/lost during Week 1. We can see the dip that Copper made, along with Oil and EEM, while markets were buying Technology stocks and Gold.

The next graph depicts percentages gained/lost during Week 2. The Copper market surged, while Oil lost further ground, and strong buying came in on EEM. There was buying in the Major Indices and Gold, some tepid buying in DVY, and continued selling in Oil.

The next graph depicts percentages gained/lost during OPEX Week 3. EEM was the strongest gainer that week, followed by the Major Indices, Copper, Gold, and DVY. Oil continued its drop.

The last graph depicts percentages gained/lost during FOMC Week 4. Gold was the big winner, followed by Copper, the Russell 2000, EEM, and Technology. Oil dropped to a lesser degree, and there was profit-taking on the Dow 30, DVY, and S&P 500.

From these graphs, I would suggest that any continued strong buying in Copper, Gold, EEM, the Russell 2000, and the Nasdaq 100 would cause buying to resume in the Dow 30 and S&P 500 stocks...ones to watch over the next week(s).

The Daily chart below of Copper shows that price closed right into a confluence of price and channel resistance, but above its downtrending 200 sma (pink) (note the high volumes on this year's advance)...one to watch for risk-on leadership, in my opinion.

It will also be interesting to see what the markets' reactions are to this Washington Post news article. Oil is trading just below Monthly WVAP (yellow broken line) and 78.6% Fibonacci fanline confluence, but just above its 50 sma (red) and 61.8% Fibonacci retracement confluence, as shown on the Daily chart below...possibly a bull flag in the making.

Gold has closed above a 1700 Fibonacci confluence level, as well as a confluence price level of 1733 (both forming support levels), as shown on the Daily chart below There is a lot of upside potential on this chart before price runs into further major resistance.

So, I'd say the markets are busy this month mixing the ingredients for the first one-third of the bottom layer of the delectable-looking cake above for bull markets to, potentially, consume by Christmas. The first layer represents Q1 of 2012, the second represents Q2, the icing represents Q3, and the tea and fairy cakes on top represent Q4. We'll see what the coming weeks whip up.

New Home Sales Still Depressed at 2009 Levels

2012-01-26T10:50:00.000-05:00

One thing that the Fed and President Obama haven't fixed yet is the number of new home sales...they remain depressed at 2009 levels, as shown on the graph below.

"Dual Mandate" Means "Greed is Good"

2012-01-25T18:46:00.001-05:00

That's the message I heard in today's press conference from Fed Chairman, Ben Bernanke, following the release of today's FOMC statement. As he mentioned, the current unemployment rate is above the Fed's targeted range, while inflation remains contained within the upper end of their current targeted range. Since he is, apparently, prepared to give leeway over and above the current 2% inflation rate in order to ease credit to stimulate job creation and the housing sector, I can interpret that to mean that the markets, in general, are not yet overbought...my assumption is that news should be received favourably by the stock market bulls.

By the way, it seems to me that an apparently stable stock market (i.e. proceeding in an orderly uptrend and higher than today) by the time the 2012 U.S. election is underway would not give Republicans cause to complain about the effectiveness of President Obama's policy measures during his term in office...an "offshoot benefit" of this "dual mandate" policy. So, I'll say that greed is good, particularly for the Democrats this year. While the VIX remains at low levels, the fear factor is, indeed, gone.

That being said, I would note the following with respect to support and resistance levels that I mentioned in my post of January 20th on the Major Indices. I'm adjusting some of these levels now since some resistance levels were broken and closed above today. The revised levels are as follows:

Dow 30 (unchanged): Support = 12600 and Resistance = 12800
S&P 500 (revised upward): Support = 1320 and Resistance = 1350
Nasdaq 100 (revised upward): Support = 2438.44 and Resistance = 2470.58
Russell 2000 (revised upward): Support = 785.00 and Resistance = 810.00
Dow Transports (unchanged): Support = 5200 and Resistance = 5300
Dow Utilities (revised upward): Support = 450.00 and Resistance = 455.00

To continue along this bullish scenario, please refer to the Weekly charts below of YM, ES, NQ & TF. I've drawn an upward-trending channel, several trendlines, and a Fibonacci Extension from the 2011 lows. In a broad sense, and from today, I'll assume that this channel will remain in effect until such time as it is breached and this upward trajectory reversed on this weekly timeframe. I'll revisit these charts on a weekly basis to see where the markets are, particularly in relation to the mid-point of the channel (broken green line)...at the moment, the upper Bollinger Band (which is widening suggesting continued buying) is roughly in line with this middle channel line on the YM, ES & TF, while the upper-quarter channel line is in line with the upper Bollinger Band (also widening) on the NQ.

A 100% Fibonacci extension (pink) from the 2011 lows to November lows would place an upside target price at:

13028 for YM
1348.75 for ES
2572.25 for NQ
832.80 for TF

If the support levels can be maintained on the Major Indices, as noted above, there is a strong likelihood that these targest can be realized in the near future. However, with such a wide channel in effect, there is a possibility that there may be some downside movement before then, while maintaining the integrity of the channel and the November lows.

After-Hours Earnings Breakout in AAPL

2012-01-24T19:20:00.001-05:00

As I'm writing this post, AAPL has broken out to make an all-time high of 468.95 in after-hours trading after releasing their latest earnings report. I last wrote about AAPL on January 9th and mentioned a couple of possible scenarios. One was a pullback to re-test November lows, and the other was a run-up by market makers into earnings.

The Daily chart below shows where tonight's price was hit...above the +2 deviation level of the upward-trending regression channel which began at the June 2010 lows. When tomorrow's candle opens, it may re-test tonight's high before dropping. Near-term support would sit, firstly, at the +1 deviation level around 440, followed by this month's Volume Profile POC (yellow horizontal line) at 422.32...the next level would lie at the channel "mean" (currently at 412.35), and, subsequently, at the 50 sma (red) at 397.15.

As I mentioned in my previous post, AAPL has, so far, been unable to remain above its +1 deviation level of this channel...we'll see whether the same applies over the next days/weeks ahead, or whether it's "different this time"...with 500.00 within reach, who knows!

High Dividend-Paying Stocks ETF vs Emerging Markets ETF

2012-01-23T19:55:00.001-05:00

Below are two 3-year Daily charts. The first chart is of an ETF containing high dividend-paying stocks, DVY, and the second is of the Emerging Markets ETF, EEM. Inasmuch as the Major Indices are near major resistance levels, as mentioned in my post of January 20th, I thought I'd compare these two ETFs to see where money flows over the next days/weeks. I'll say that DVY represents value stocks and that EEM represents the more risky, volatile growth stocks.

DVY made a 3-year high on January 3rd of this year and is currently holding above last month's Volume Profile POC (horizontal red line) at 52.81. It has been in a daily uptrend since its December lows. If traders are interested in purchasing additional value stocks, I'd expect to see DVY break and hold above its high of 54.63.

In contrast, EEM made a 3-year high on July 2, 2011 and has retraced almost 50% from its October lows. It is currently holding above last November's Volume Profile POC, after a lower POC was made in December. It has also been in uptrend since its December lows. It's approaching resistance around 42.90. We can see that it is forming two interesting patterns...the first, a larger Head & Shoulders pattern with a neckline around 38.50 (pink horizontal line), and the second, a smaller Inverted Head & Shoulders pattern with a neckline around 42.90 (blue horizontal line), which also happens to be the right shoulder of the larger H&S pattern. If traders are interested in purchasing additional (higher risk and more volatile) growth stocks, I'd expect to see EEM break and hold above the IHS neckline of 42.90, and the yellow downtrend line just above.

The two graphs below shows a comparison of percentages gained and lost so far during two time periods on DVY and EEM, as well as on the Major Indices.

The first graph begins at the May 2, 2011 high of EEM until today's close. The second graph represents price action from January 3, 2012 to today's close. The first graph shows an overall gain in percentage from the May 2nd high for DVY, with EEM still in negative territory. The second graph shows a greatly reduced gain in percentage for 2012 for DVY, with EEM gaining the most.

In conclusion, using the reference points as noted above on the Daily charts in combination with these graphs, we can track to see whether money flows into or out of these value vs higher-risk, volatile growth ETFs over the next days/weeks.

European Consumer Confidence Has Not Improved

2012-01-23T10:16:00.001-05:00

European Confidence data released today shows that consumer confidence remains depressed at 2008/09 levels, well below zero, as shown on the graph below. This low level of consumer spending is fact in spite of the rosy picture that markets are attempting to paint and is well below the average recorded for the past nine years.

Why it's best to "Let sleeping dogs lie"...

2012-01-22T11:45:00.001-05:00

Portugal...The Eurozone "Poor Relative"

2012-01-20T19:09:00.000-05:00

Below are several charts and graphs (available at www.Stockcharts.com) comparing the German DAX, French CAC, Portuguese PSI, and Greek GRDOW Indices over three different time periods.

The first two are taken over the past three months. We can see on these that although the DAX and CAC began to rally in November, Greece continued to drop until last week, and Portugal has basically moved sideways from November.

The next four depict the recent surge in the Greek index compared with the other three indices as talks are underway over Greek debt...the first two begin on January 2nd, 2012, and the last two begin on January 16th.

The last Daily chart below of the Portuguese Index shows diverging, declining momentum (on the last rally from mid-December) and is now in negative territory, and no positive divergence yet on Stochastics...one to watch for either continued weakness and a break below the shorter-term uptrend, or a breakout above and reversal of the senior downtrend.

Touchdown in Sight for Dow 30?

2012-01-20T18:14:00.002-05:00

In my post on December 9th, 2011, I outlined a hypothetical scenario whereby if the Dow 30 played out over the next three days like it did on the 9th (it gained 200 points that day), we'd see the Dow reach 12800 by the close on December 14th for a "touchdown." Needless to say, it didn't work out within that time period; however, with today's close at 12720.48, that game plan is now within reach, provided it can push above a minor resistance level of 12754, as shown on the Daily chart below. The Dow has gained nearly 1000 points since the December 2011 lows. Near-term support is at 12600.

The S&P 500 has closed above 1300 for three days now, forming near-term support at this level...near-term resistance is at 1320, as shown on the Daily chart below.

The Nasdaq 100 closed above 10 year highs yesterday, but pulled back and closed just below 2011 highs, as shown on the Daily chart below...this 2011 high is near-term resistance at 2438.44 and near-term support is at 2400.

The Russell 2000 closed above near-term support of 780, but closed just below near-term resistance of 785, as shown on the Daily chart below...the next resistance level sits at 810.

The Dow Transports closed just below near-term resistance of 5300, as shown on the Daily chart below. Near-term support is at 5200.

The Dow Utilities bounced and closed up from near-term support at 445.00, after breaking below prior support at 455.00, as shown on the Daily chart below. This is a chart to keep an eye on to see whether it can rally above near-term resistance at 450.00, and, if so, whether we see all three Dow Indices move up in tandem next week...which could provide the Dow 30 with the stimulus to reach the 12800 level, as mentioned above.

Each candle on the chartgrid below of the YM, ES, NQ & TF represents a one-month Options Expiry period, and the current candle closed today. Upside targets for the next OPEX candle are the top Bollinger Bands at 13056, 1390, 2546, and 877, respectively. Near-term support levels are the mid-Bollinger Bands at 11510, 1220, 2181, and 735, respectively. This last candle advanced on considerably lower volumes, so any meaningful and continued move to the upside should be verified by higher volumes on subsequent candles.

Below is a Weekly chartgrid of the YM, ES, NQ & TF. We can see that they closed the week above near-term resistance, but did so on lower volumes than last week. However, the Bollinger Bands are widening as price nears the top band, which suggests a continuation of the rally. Near-term resistance levels are the top Bollinger Bands at 12857, 1332, 2460, and 798, respectively. Near-term support is the POC of the monthly Volume Profile for January (yellow horizontal lines) at 12437, 1286, 2360, and 759, respectively. I'd also like to see higher volumes on subsequent weekly candles in order to verify the sustainability of this latest move up.

YM, ES, NQ & TF...Market Hours Only Charts

2012-01-18T20:56:00.001-05:00

Below are 90-day 60-minute market hours only charts of YM, ES, NQ & TF. Overlayed on each chart are Bollinger Bands (which are based on the 50 sma and deviations of +2.0 and -2.0), monthly Volume Profiles (red horizontal lines are POC), 200 sma (pink), Volume Profile for the 90 days at the right edge of the chart, and my short-term RSI indicator. I've chosen this timeframe to look at price action from the October 2011 lows during market hours only.

Price is pushing the boundaries of the upper Bollinger Band, and my RSI is showing a negative divergence from yesterday's and today's actions...ones to watch to see whether they return to the mid-Bollinger Band (50 sma) soon. Alternatively, in view of breaks and closes above near-term resistance levels that occurred today on the Major Indices (except Dow Utilities), as mentioned in my post of January 10th, we may see a parabolic rise culminating in exhaustion volumes before such a drop takes place.

Major Indices Update for January 17, 2012

2012-01-17T21:07:00.001-05:00

The support and resistance levels for the Major Indices noted in my post on January 10th still apply.

In that post, I also made reference to a 10-Day 30-Minute chartgrid of the YM, ES, NQ & TF and said that any repeated attempts to advance convincingly beyond the highs of the first week in January would need to be accompanied by higher volumes. The horizontal white line on the updated chartgrid below represents that week's high. We can see that:

the YM has struggled to stay above that level on building volumes, and today's advance took place in overnight trading on very low volumes...price fell back to the range high which is near-term support
the ES has managed to stay above this range high, for the most part, on building volumes, and today's advance also took place in overnight trading on very low volumes...price is trading just above the 200 sma (pink) and last week's Volume Profile POC (yellow horizontal line) on this timeframe
the NQ has also managed to stay above this range high, for the most part, on building volumes, and today's advance also took place in overnight trading on very low volumes...price is trading just below its 50 sma (red)
the TF has also managed to stay above this range high, for the most part, on building volumes, and today's advance also took place in overnight trading on very low volumes...price is trading below both moving averages, just above last week's Volume Profile POC, and just above the 10-day Volume Profile POC (red horizontal line) at the right edge of the chart

Inasmuch as today's sell-off during market hours wiped out most of the overnight gains on the YM, ES & TF, I'd look for, firstly, today's low to hold as near-term support, and, secondly, the range high to hold as support...this range high is roughly in line with the support levels for the Major Indices mentioned in my January 10th post. Also, since the Nasdaq 100 is outpacing the other three in terms of relative strength, it's my opinion that any perceived reversal below that range high by these three would need the Nasdaq to come on board, and all on high volumes, together with a cross (and hold) of the 50 sma below the 200 sma. Otherwise, we may see further attempts to push higher. The 10-Day percentage comparison chart below shows this relative strength on the Nasdaq and the weakening of the Dow 30.

The updated Daily chart below of the U.S. $ shows that it is also holding above its near-term support level of 81.00...an important level for the $ bulls to hold, as I mentioned in my January 10th post.

Gold, Oil, Copper & Silver...Weekly & OPEX Charts

2012-01-15T13:49:00.001-05:00

Below are Weekly charts during a one-year time period of Gold, Oil, Copper and Silver with Bollinger Bands, 50 sma (red), monthly Volume Profiles (horizontal yellow lines are POC), and a one-year Volume Profile at the right edge (red horizontal line is POC).

While Oil pulled back this past week to confluence support, Gold, Copper and Silver rallied. For this time frame, if Copper and Silver continue to rally, they will be returning to their "mean" (50 sma and one-year POC), and if Gold and Oil rally, they will be adding risk by moving away from their "mean." Volumes were higher last week, and potential targets on the upside are mid-to upper Bollinger Band, as follows:

Gold - mid-Bollinger Band at 1700ish
Oil - upper Bollinger Band at 107ish
Copper - upper Bollinger Band at 4.00ish
Silver - mid-Bollinger Band at 32.70ish

Below are OPEX charts during a 5-year time period of Gold, Oil, Copper and Silver with Bollinger Bands, 50 sma (red), and a 5-year volume Profile at the right edge (red horizontal line is POC). Each candle represents a one-month Options Expiry period and the current candle will close on January 20th.

While Gold and Silver initially dropped since December 19th, they have rallied and look poised to continue their rally, while Copper has shown the most strength, followed by Oil. They are all above their "mean" on this time frame, and any rally will indicate further risk appetite for these commodities. Copper and Silver are just below their mid-Bollinger Band at 3.80ish and 30.60ish, respectively, so it will be worth watching these two to see if it acts as resistance, while Gold and Oil have their upper Bollinger Band as potential targets on the long side at 1850ish and 108ish, respectively.

Since volumes are considerably lower for this OPEX period, any rally or decline on the current candle would need to be confirmed by the next OPEX period's action and close. In this regard, upcoming Daily and Weekly volumes may give further clues as to commitment in either direction...especially if we see parabolic moves to the upside on progressively increasing volumes.

The following two histogram graphs (available at www.Stockcharts.com) show percentages gained/lost for the past week and for the current OPEX period. We can see that Copper, in particular, has been very strong for both of these time periods, and that, while Oil declined last week, it is still second in strength during the OPEX period, with Gold gaining the least.

We'll see if Dr. Copper stays strong in the coming days/weeks and what volumes say...and how equity markets react.

Photos That Move...

2012-01-14T13:47:00.001-05:00

Jamie Beck and Kevin Burg's photos that move...for your viewing pleasure...

OPEX Breakout Coming?

2012-01-13T20:14:00.001-05:00

Next Friday is Options Expiry. Looking at the Weekly charts of YM, ES, NQ & TF below, we can see that they closed the week at or just below resistance on higher volume, with Bollinger Bands widening, which suggests an upward continuation. In support of this suggestion, the Dow 30, Dow Transports, Dow Utilities, S&P 500, Nasdaq 100, and Russell 2000 all closed above their support levels that I mentioned in my post on January 10th.

If they break and hold above, they may make a run towards the upper Bollinger Bands on the charts below...each candle represents a one-month Options Expiry period...the current candle will close on January 20th. We'll see if they do break and hold above resistance, and how far they rally...alternatively, price may drop to the mid-Bollinger Band on either timeframe. Inasmuch as it's a short week, we may see daily opening gaps occurring from aggressive overnight trading with market makers running prices further up during market hours in order to reach such lofty targets.

Enjoy your long weekend!

U.S. Trade Balance Shrinks...

2012-01-13T09:57:00.001-05:00

Further to my post of January 11th, I have my answer...it would appear not. Based on Trade Balance data released today, the trade deficit widened more than forecast...attempts to move higher have progressively failed from the highs in 2009, as shown on the graph below.

YM, ES, NQ & TF...Sectors...Gold...Oil

2012-01-12T19:32:00.002-05:00

My post of January 10th made reference to a 10-Day 30-Minute chartgrid of the YM, ES, NQ & TF. I mentioned that any repeated attempts to advance convincingly beyond last week's high will need to be accompanied by higher volumes. The updated chartgrid below shows, firstly, that the YM has not been able to sustain a breakout above that high, while the ES, NQ & TF advanced today after re-testing this level. Today's initial drop occurred on higher volumes, with the bounce on lower volumes. My prior comments still apply...I'd be looking for higher volumes on any sustained breakout to validate a bullish setup.

Further to my post yesterday, the Sector Rotation graph below shows today's action on the Major Sectors. Materials was the big gainer, while Energy was the big loser...money continued to flow into the "Risk" sectors, as well...will see if money continues to flow into "Risk" on any further advance on YM, ES, NQ & TF.

The 4-Hour chart below of Gold shows that it ran into confluence resistance (Fibonacci, price, and a high volume level on the Volume Profile at the right edge for the entire 180 days) at 1660 today. This is a major resistance level and the advancing volumes were steady, so will see if further risk appetite continues in this market, and what happens to volumes.

The 4-Hour chart below of Oil shows that it dropped into Volume Profile POC (for both last month and for the entire 180 days) and Fibonacci confluence support today. It has failed, once again, to hold the 102.00 level that I last mentioned in my post on December 29th, 2011. The increase in volumes this year, together with today's drop below this year's range, suggests that a topping process has begun...a chart I'll continue to watch over the next days/weeks.

In Memory...Here's to You, Honey...

2012-01-12T01:50:00.000-05:00

Money Flow in the Major Indices and Sectors From January 2011

2012-01-11T19:34:00.001-05:00

The following graphs/charts (courtesy of www.Stockcharts.com) depict percentage gains and losses in the Major Indices and Sectors during several periods since the beginning of January 2011.

The first two charts show price action from January 3rd, 2011 to today's close. Prices topped in July of 2011 and bottomed in September.

The first two graphs (in histogram format) also show percentages gained and lost from January 3rd, 2011 to today's close. Overall, the Dow Utilities and Dow 30 Indices held up the best, while the Russell 2000 was the weakest. During that time period, the majority of money flowed into the defensive sectors, namely, Consumer Staples, Health Care, and Utilities, and flowed out of Financials.

The next two graphs show percentages lost from July 1st to October 3rd. Overall, the Dow Utilities and Nasdaq 100 held up the best, while the Russell 2000 and Dow Transports were the weakest. During that time period, the majority of money flowed out of the Financials, Materials, Industrials, Energy, and Consumer Discretionary sectors.

The next two graphs show percentages gained from October 3rd to today's close. Overall, the Russell 2000 and Dow Transports were the biggest gainers, followed by the S&P 500, Dow 30, and the Nasdaq 100. During that time period, the majority of money flowed into the Materials, Industrials, Energy, and Financials sectors.

The next two graphs show percentages gained from December 1st to today's close. Overall, the Dow Transports and Russell 2000 were the biggest gainers, followed by the S&P 500, Dow 30, and the Nasdaq 100. During that time period, the majority of money flowed into the Financials (a big differential here), followed by the Industrials, Materials, Health Care, and Consumer Discretionary sectors, and with less flowing into the Consumer Staples, Energy, and Utilities sectors.

The next two graphs show percentages gained and lost from January 3rd of this year to today's close. Overall, the Dow Transports and Nasdaq 100 were the biggest gainers, followed by the Russell 2000 and S&P 500, while the Dow 30 gained the least, and Dow Utilities declined. During that time period, the majority of money flowed into the Materials, Financials, Industrials, and Consumer Discretionary sectors, while money flowed out of the Utilities, Consumer Staples, and Energy sectors.

The next two graphs show percentages gained and lost this week. Overall, the Dow Transports and Russell 2000 were the biggest gainers, followed by the S&P 500 and Nasdaq 100, while the Dow 30 gained the least, and Dow Utilities declined. During that time period, the majority of money flowed into the Financials, Materials, Industrials, Health Care, and Consumer Discretionary sectors, while money flowed out of the Energy, Utilities, and Consumer Staples sectors.

Of the four Major Indices and in terms of percentages, the Russell 2000 lost the most from the beginning of July to October 3rd of 2011, while the Nasdaq 100 lost the least...the Dow 30 lost about half as much as compared with the Russell 2000. However, when we look at the next graph which shows percentages lost and gained from July 1st to today's close, we see that the Dow 30 has regained its losses much more than the Russell 2000...showing that the Russell 200 still has some catching up to do. We'll see if money flows continue to be strong in the Russell 2000 over the coming weeks. Indices to watch are the Dow 30 and Russell 2000, particularly since money flows into the Dow 30 have declined quite a bit from January 3rd of this year.

Of the Major Sectors, the Financials, Materials, Energy, and Industrials sectors lost the most from the beginning of July to October 3rd of 2011, while Utilities, Consumer Staples, and Health Care lost the least. When we look at the last graph which shows percentages lost and gained from July 1st to today's close, we see that gains have been made in all sectors at approximately the same rate. However, it appears that money has begun to flow out of the defensive sectors and into more risky assets from January 3rd of this year...we'll see if that trend continues in the coming weeks.

Can U.S. Markets Really Ignore European Woes?

2012-01-11T11:58:00.001-05:00

That is my question of the day.

With Europe's GDP shrinking well below 2008 levels and Britain's trade balance declining below 2009 levels, is the U.S. really immune to the knock-off effects? Time will tell...

P.S. And, who's minding the store with U.S. politicians focused on the election this year rather than on fiscal and economic problems? The Fed can only do so much with monetary policy...

Support and Resistance Levels on Major Indices

2012-01-10T19:37:00.005-05:00

The Daily charts below show near-term support and resistance levels for the Major Indices, as follows:

Dow 30: Support = 12400 and Resistance = 12500
Dow Transports: Support = 5150 and Resistance = 5200
Dow Utilities: Support = 450.00 and Resistance = 455.00
S&P 500: Support = 1280 and Resistance = 1300
Nasdaq 100: Support = 2360 and Resistance = 2380
Russell 2000: Support = 755 and Resistance = 770

The 10-Day 30-Minute chartgrid below of the YM, ES, NQ & TF shows that price failed to advance after making early highs today and fell toward the close. The YM and NQ fell back into last week's range by the end of the day. Volumes were still on the low side today...any repeated attempt(s) to advance convincingly beyond last week's high will need to be accompanied by higher volumes, in my opinion, and as I mentioned in my post on January 6th. We may see more volumes and movement once the Beige Book report is released tomorrow at 2:00 p.m.

So far, the U.S. $ is holding above its near-term support level of 81.00, as shown on the Daily chart below...an important level for the $ bulls to hold, as I also mentioned in my January 6th post.

Priorities of the Human Species...

2012-01-10T12:29:00.001-05:00

Amazing...looks like we humans spend our time drinking coffee while playing on our iPads, bailing out banks, buying art, taking over companies, avoiding paying taxes, building defenses, and exploring space...makes me wonder who's actually being productive, where all of this is getting us, and, really, what is the purpose of life...

Click on link for large picture:
http://infographiclist.com/2012/01/10/priorities-of-the-human-species-just-something-to-think-about-infographic/

AAPL Cycles..."Dead Cat Bounce" Brewing?

2012-01-09T20:20:00.001-05:00

AAPL pulled back today without breaking above the +1 level of its uptrending regression channel, as shown on the Daily chart below. It has moved in cycles since its June 2011 low...pulling back on overbought readings of my short-term RSI indicator, and traditional MACD and Stochastics indicators...and after briefly breaking above the +1 channel level.

At the moment, there is a negative divergence on my RSI indicator and on Stochastics...MACD is still rising. Near-term support sits at, first, Monthly VWAP (broken yellow) at 417.63, then Monthly Volume Profile POC (yellow horizontal lines) at 413.86, and then the channel "mean" (broken pink) at 406.83.

As can be seen from the one-year Volume Profile at the right edge of the chart, volumes above 410.00 are very thin and do not support sustainable higher prices at this time. Although volumes have been rising over the past few days, they are well below the high levels during previous cycle rallies, as are all the volumes from its November 2011 cycle low. As such, I'd be wary of buying any breakouts above today's high on what could turn out to be a "dead cat bounce" here. I wouldn't be surprised to see a re-test of the November low in the near future. I am aware, however, of upcoming earnings on January 24th...as such, market makers may try to run the price up until then.

With pre-Christmas consumer spending reaching an all-time high since 2000, as reported today (see graph below courtesy of www.Forexfactory.com), it may be that consumers have reached their limits on their credit and are now stuck with paying down more debt than ever before...which may have an impact on future APPL product purchases.

Bank of Canada Business Outlook Survey

2012-01-09T11:38:00.001-05:00

The Bank of Canada released its latest Business Outlook Survey this morning. As referenced in the notes below (courtesy of www.Forexfactory.com), it's a leading indicator of economic health, affecting spending, hiring, and investment, and it can have predictive qualities regarding future economic conditions because the surveyed firms are selected in accordance with their composition of the nation's GDP.

The survey is shown in its entirety here: http://www.bankofcanada.ca/wp-content/uploads/2012/01/bos_winter2011.pdf

Highlights of the survey show that:

firms report an improvement in sales growth over the past year
firms are not expecting an increase in sales growth over the next 12 months, falling to just below zero
firms still plan to increase investment, but remain somewhat cautious
intentions to increase employment rose modestly
production capacity pressures are little changed
reports of labour shortages are essentially unchanged
firms expect input prices to rise at about the same rate
firms expect output prices to increase at a slower rate
inflation expectations continue to be concentrated within the Bank's inflation-control range of 1 to 3 per cent.
firms no longer report a net easing in credit conditions, which had tightened over the past three months due to an increase in borrowing costs

In a nutshell, businesses are anticipating a slower-to-zero sales growth for 2012 and tightened credit conditions...not a robust outlook for healthy growth.

Additionally, today's data released on Canadian Building Permits shows a decline, as shown on the graph below.

Data on the Canadian New Home Price Index is due for release this Thursday...it's an indicator worth watching over the next months, since it's a leading indicator of the housing industry's health...also, as I mentioned in my last post, forecasters have warned that Canada's 13-year housing boom has reached its end: http://strawberryblondesmarketsummary.blogspot.com/2012/01/are-we-canadians-simply-pessimistic.html If Canada's housing bubble bursts (watch for early signs in Ontario and Quebec), all hell will break loose, in my opinion.

Toronto's Read Estate Index is currently trading near the 2008 highs before prices plunged, as shown on the Weekly chart below.

The 5-Day chart below shows price trading up against near-term resistance.

Are We Canadians Simply a Pessimistic Bunch?

2012-01-08T13:59:00.001-05:00

These excerpts are from an article printed by The Globe and Mail on January 6th:

"Canada is not technically in a recession, but to the vast majority of consumers, it feels like one.
Economists, Statistics Canada and the Bank of Canada have been telling Canadians the country has been out of a slump since mid-2009, and is now well into a period of expansion. But Canadians see things differently. Despite the economy’s relative strong health in a world marked by tumult, they are the most pessimistic they’ve been in over a decade – and fully 70 per cent believe the nation is in a recession, according to an annual tracking poll released Thursday."

"There has certainly been an ample amount of economic news of late to trouble Canadians, including the fiscal and monetary crisis in Europe, volatility on capital markets, hints of a possible slowdown in China, rising oil prices and negative employment numbers in Canada in three of the past four quarters. And household debt has reached record levels in Canada, prompting Bank of Canada Governor Mark Carney to warn last month that “our greatest domestic risk relates to household finances.” Meanwhile, forecasters have warned that Canada’s 13-year housing boom has reached its end."

Here is a link to the article:
http://www.theglobeandmail.com/report-on-business/economy/growth/vast-majority-of-canadians-believe-country-is-in-recession/article2292215/

Some economists believe that the pessimism is just a reflection of world economic problems, since GDP numbers don't add up to recession at the moment. However, data released on January 6th showed that Canada's jobless rate rose for a third month in December, the longest advance in two years, to 7.5% from 7.4%, as reported by Bloomberg: http://www.bloomberg.com/news/2012-01-06/canada-s-jobless-rate-rose-for-third-month-in-december-to-7-5-.html

The combination of this survey and rising jobless rate may, in fact, be a warning, this time, that a recession is coming to Canada.

Below are a series of charts/graphs which compare the S&P 500 Index with Canada's TSX Index (courtesy of www.Stockcharts.com).

The first chart represents one year...the SPX has rallied to a much greater extent during the fourth quarter of 2011...while the SPX has gained 0.31% during this one-year time period, the TSX is still in negative territory at -8.44%.

Taking a closer look at the third quarter of 2011, the next chart begins from October 3rd and shows that the SPX gained 16.25% from this date, and the TSX gained 8.33%.

The graph below begins on December 1st. The SPX gained 2.67% from that date, while the TSX only gained 0.62%.

The next chart begins last Tuesday. The SPX gained 0.06% from this date, and the TSX is down at -0.16%. The rate of deceleration on the TSX has accelerated on each subsequent day last week in comparison with the SPX, as depicted by the following 3 graphs.

Canada's stock market index, TSX, is still lagging that of the U.S. stock market index, SPX. It appears to be affected by outside influences (i.e. global issues) more than the SPX and may, therefore, be more subject to volatility. It was leading the SPX during the latter part of the first quarter of 2011, but was the first to signal weakness in April. December has been a weak month for the TSX, as has been the first week of January...something to keep an eye on to see if this weakness continues and whether it continues to accelerate...and whether it, ultimately, influences the SPX.

Weekly Wrap-up...Jan. 3-6, 2012

2012-01-06T22:14:00.002-05:00

My post of December 30, 2011 refers: http://strawberryblondesmarketsummary.blogspot.com/2011/12/2011-market-wrap-up.html

In that post I made reference to a number of markets to wrap up 2011. I'll provide commentary on those markets to wrap up and compare the action this past week.

The Nasdaq 100 Index was the biggest gainer, with the Dow Utilities the biggest loser, compared to the Dow 30, Dow Transports, S&P 500, and Russell 2000 Indices, as shown on the 4-Day graph below (courtesy of www.Stockcharts.com).

The European Financials ETF, EUFN, was, by far, the biggest loser, with the U.S. Financials, XLF, making a slight gain, compared to the Commodities ETF, DBC, the Agricultural Commodities ETF, DBA, the Emerging Markets ETF, EEM, and the Chinese Financials ETF, GXC, as shown on the 4-Day graph below. DBA and EEM are still weak.

Once again, the U.S. $ was the biggest gainer, and the Euro was the biggest loser, followed by the Canadian $, the Aussie $, and the British Pound, as shown on the 4-Day graph below.

Gold made a modest gain, while Oil made a modest loss, and Copper was the biggest loser, as shown on the 4-Day graph below.

Even though the S&P 500 only gained a modest 0.06%, the VIX lost 10.19%, as shown on the 4-Day graph below.

From these graphs, we can see that the U.S. $ gained the most at 2.06%, followed by a gain of 1.47% in the Nasdaq 100. The Dow Utilities made a modest loss, Copper, Agricultural Commodities, Emerging Markets, and the Chinese Financials made further losses, while the Euro and the European Financials made considerable losses. With the 10% drop in volatility, this may set the stage for a possible breakout and rally in Equities. On the surface, it looks like institutions are willing to park their $ in the U.S. equity markets, as well as in the U.S. $, in spite of weakness in Chinese, Japanese and European markets.

I'm still mindful, however, of comments made in my post of January 3rd (stocks above their 20-
Day, 50-Day and 200-Day Moving Averages are still sitting near major resistance levels): http://strawberryblondesmarketsummary.blogspot.com/2012/01/this-weeks-big-questionwill-todays-gap.html

Therefore, I'll look a bit more closely at the YM, ES, NQ & TF for possible clues on near-term support and resistance zones for equities.

Below is a 5-Year Monthly chartgrid, with the Volume Profile noted for this period at the right edge of the charts. The red horizontal line in the profile is the POC. Price on all 4 e-minis is above the Bollinger Band mid-line, is currently above the 50 sma (red), and is currently above the POC.

Below is a 1-Year Daily chartgrid, with the Volume Profile noted for this period at the right edge of the charts, and with the Monthly Volume Profile POC (yellow horizontal lines) also shown for each month. They are all at or near their top Bollinger Band and above the 50 sma. The YM and NQ are just above the Yearly POC, while the ES & TF are considerably below. The YM, ES & NQ are above the 200 sma (pink), while the TF is just below.

They are all trading above December's POC. The YM & NQ are trading below July's POC, and the ES & TF are still trading below June's POC, which is lower than July's. On this timeframe, I'd place support and resistance at these Monthly POC levels, as follows:

YM - Resistance = 12498 and Support = 12043
ES - Resistance = 1279 and Support = 1245 (July's Resistance = 1326)
NQ - Resistance = 2363 and Support = 2280
TF - Resistance = 787 and Support = 738 (July's Resistance = 833)

Below is a 4-Day 30-Minute chartgrid, with this past week's Volume Profile at the right edge of the chart...the POC is shown in red within the profile, and is extended as a yellow line to the left. As can be seen, the only e-mini that moved above the POC was the NQ, indicating that risk appetite went into the Technology sector for the week (and slightly into the Financials sector as noted above), while the others simply traded in a range.

I'd look for a breakout and hold either above or below this past week's Volume Profile high/low on all 4 e-minis before trying to determine short-term trend from here...however, because volumes were still lower than normal this past week, I'd look for higher volumes in order to confirm any sustainable breakout/breakdown. I'd also watch to see if the 50 sma can remain above the 200 sma on any pullback within their range in order to assess developing bullish-versus-bearish sentiment. In this regard, near-term resistance and support levels for this intraday timeframe are as follows:

YM - Resistance = 12415 and Support = 12219
ES - Resistance = 1282.25 and Support = 1259.75
NQ - Resistance = 2358.75 and Support = 2302.50
TF - Resistance = 759 and Support = 732.60

Of interest, as well, will be the U.S. $, as it attempts to break and hold above price and regression channel confluence resistance at 81.76ish, as shown on the Daily chart below...a break and hold above this level could send it to the next resistance level of 83.40ish...near-term support is 81.00 (prior attempts to hold above this level have failed since November, 2010, so it is an important level for the $ bulls to hold).

Chinese Dragon About to Blow?...Hot or Cold?

2012-01-04T19:39:00.002-05:00

2012 is the Chinese Year of the Dragon (the Water Dragon, to be more specific). These two links to Wikipedia provide a bit of information about this zodiac sign:
http://en.wikipedia.org/wiki/Dragon_(zodiac)#Years_and_the_Five_Elements
and
http://en.wikipedia.org/wiki/Chinese_dragon

This excerpt from Wikipedia describes Chinese dragons:
"In contrast to European dragons, which are considered evil, Chinese dragons traditionally symbolize potent and auspicious powers, particularly control over water, rainfall, hurricane, and floods. The dragon is also a symbol of power, strength, and good luck. With this, the Emperor of China usually uses the dragon as a symbol of his imperial power."

This excerpt from Wikipedia describes water:
"Water (Chinese: 水; pinyin: shuǐ), is the low point of the matter, or the matter's dying or hiding stage.^[1] Water is the fifth stage of Wu Xing.
Water is the most yin in character of the Five elements. Its motion is downward and inward and its energy is stillness and conserving. It is associated with the Winter, the North, the planet Mercury, the color black, cold weather, night, and the Black Tortoise (Xuan Wu) in Four Symbols.
It is also associated with the moon, which was believed to cause the dew to fall at night."
This is the Wikipedia link to Water:
http://en.wikipedia.org/wiki/Water_(Wu_Xing)

The Chinese Shanghai Stock Exchange Index is still in downtrend on its Daily timeframe, as shown on the 1-Year chart below. There is a positive divergence forming on the RSI and the MACD, with a MACD cross. As well, an inverted Head & Shoulders pattern may be forming...however if the right shoulder breaches 2150, this formation would be called into question...one to watch for any potential drag on the U.S. markets if a lower low is made. However, like its Water Dragon Year, 2012 may become its low point for this index before staging a rally.

The 3-Year Weekly chart below shows this index is re-testing a prior support zone from February/March 2009. This index has been weak since it peaked in July/August 2009.

This Week's Big Question..."Will Today's Gap Hold on the Major Indices?"

2012-01-03T18:31:00.001-05:00

As can be seen from the following three 1-Year charts below (courtesy of www.barchart.com), stocks above their 20-Day, 50-Day, and 200-Day Averages are now sitting at major resistance levels...

In view of the above, my big question is, "Will today's gap hold on the Major Indices?" My second question is, "Can they advance convincingly from here?" The 1-Year charts of these indices are below...resistance and support levels are shown on the charts...price on each of them closed at or above prior resistance, and below the next resistance level (the Dow Utilities was the exception to today's action with the other indices, as it dropped significantly before resting on confluence support).

We'll see whether or not bulls come fully on board this week, and whether they can hold these indices above their new support levels....failure to do so, will send the indices back into their prior ranges, and they will be subject to further (and potentially, large) bearish downdrafts...the Nasdaq 100 and Russell 2000, in particular, are still quite vulnerable to bear raids.

Happy New Year 2012!

2012-01-01T01:33:00.001-05:00

From Wikipedia...background information on Auld Lang Syne: http://en.wikipedia.org/wiki/Auld_Lang_Syne

New Year's Resolution...;-)

2011-12-31T12:49:00.001-05:00

2011 Market Wrap-up

2011-12-30T16:37:00.001-05:00

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

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! :-)

The Fate of Oil

2011-12-29T18:50:00.001-05:00

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.

European Money Supply and Private Loans Dip

2011-12-29T12:38:00.001-05:00

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...

Yet Another Indicator Confirming European Economic Weakness

2011-12-28T12:00:00.001-05:00

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...

Holiday Week

2011-12-27T12:11:00.002-05:00

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!

European Stability Mechanism

2011-12-26T12:56:00.001-05:00

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:

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...

Merry Christmas 2011!

2011-12-25T10:46:00.001-05:00

The following Christmas-theme graphics are provided, courtesy of www.infographiclist.com, together with their respective links (clink on link to see large version):

http://infographiclist.com/2011/12/12/christmas-around-the-world-infographic/

http://infographiclist.com/2011/11/26/the-twelve-days-of-christmas-infographic/

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!

3 Dows...DBC vs AUD/USD...DBA vs POT vs SPX

2011-12-24T15:31:00.003-05:00

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):

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...

2011-12-24T12:23:00.001-05:00

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... ;-)

2011-12-24T02:54:00.000-05:00

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?"

Gappy Christmas!

2011-12-23T19:15:00.001-05:00

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:

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

2011-12-23T10:18:00.000-05:00

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.

S&P 500 vs (nearly) Everything Else

2011-12-22T16:19:00.000-05:00

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.

Currency Wars About to Begin?

2011-12-22T09:35:00.000-05:00

Data released (quarterly) pre-market today shows that Britain's Current Account dropped to the lowest level since the December 2007 release, as shown on the graph below (courtesy of www.forexfactory.com).

Since it's directly linked to currency demand, I've put up the following three Forex charts. The first is a Weekly chart of GBP/USD. The British Pound has been dropping against the U.S. $ since November 2007. It's currently trading in the lower one-third of the Fibonacci retracement...below resistance at 1.58 and above support at 1.54...below both the 50 and 200 smas...and below the 5-Year TPO Profile POC (red horizontal line), which is roughly in line with the 200 sma.

The second is a Weekly chart of EUR/GBP. The Euro has been dropping against the Pound since December 2008. It's currently trading in the middle one-third of the Fibonacci retracement (taken during the same time period as the first chart)...below resistance at 0.86 and above support at 0.83...below both the 50 and 200 smas...and below the 5-Year TPO Profile POC, which is just above the 50 sma.

The third is a Weekly chart of EUR/USD. the Euro has been dropping against the U.S. $ since July 2008. It's currently trading in the lower one-third of the Fibonacci retracement...immediately below trendline resistance at 1.306ish and above support at 1.3...below both the 50 and 200 smas...and below the 5-Year TPO Profile POC.

Since the flow began out of the Pound and into the U.S. $ during 2008, the Pound has firmed in the lower one-third zone and is attempting to hold above major support. Since 2009, the Euro has been dropping against the Pound and is attempting to hold above major support. Since July 2008, the Euro has been dropping against the U.S. $ and is attempting to hold above major support. It would appear that currency wars will now begin in earnest...with the U.S. $ as the potential victor, overall, for the next year, or so...ones I'll be watching, as mentioned in my previous post on December 14th: http://strawberryblondesmarketsummary.blogspot.com/2011/12/us-vs-british-pound-sterling.html

The Game of "Market Leapfrog"

2011-12-21T18:47:00.001-05:00

This article by The Wall Street Journal today reported that the National Association of Realtors revised downward its sales figures by 14% from 2007 through 2010, showing that the housing bust was far worse than initially thought: http://blogs.wsj.com/economics/2011/12/21/realtors-lower-2007-2010-home-sales-estimates-by-14/
It makes me wonder if Realty and Home Builders stocks and ETFs are overvalued by 14% by implication...

Below is a Year-to-date percentage comparison chart of the S&P 500 Index with the Realty Majors ETF, ICF, the Home Builders ETF, XHB, the Commodities ETF, DBC, and the Financials ETF, XLF. I mentioned some of these in my post yesterday: http://strawberryblondesmarketsummary.blogspot.com/2011/12/markets-sample-christmas-pudding-early.html

On this particular chart, we can see that Commodities have basically outperformed the S&P 500 from January, but are now very slightly below...the Realty sector has played "market leapfrog" with Commodities and has been in the lead since October 20th...the Home Builders sector has lagged the S&P 500 since July 1st, but has just shot above very slightly...and the Financials sector has lagged all of these instruments since February 22nd.

Something I'll watch for is whether the Realty sector and Commodities sector continue to outpace the S&P 500 and, potentially, move it higher, and whether the Home Builders sector is seriously improving or whether this week's rally was just speculative. Additionally, I'll track the Financials sector to see whether it continues to firm and build support, or whether major weakness sets in. Any ensuing major decline by any of these ETFs could negatively impact the S&P 500.

The 5-Day 5-minute percentage comparison chart below of these instruments depicts the jump higher by XHB over the past 2 days...we'll see whether that continues for the rest of this week and following weeks.