Cyrus and Twitch

And now for something completely different...

Congratulations, Cyrus, for making it to the Finals of So You Think You Can Dance Season 9! You rocked, kid...well done and best of luck in your career as an amazing dancer!

And this was my favourite routine of the season...awesome...

I must say that our American neighbours sure do produce mega talent!

SPX vs Financials vs Emerging Markets

Further to my post of September 4th, I would note that the SPX, XLF, and EEM have recently broken above trendline resistance, as shown on the Weekly chart below.

The Daily chartgrid and the 2-day graph below of the 9 Major Sectors show that profit-taking has occurred since last Friday, particularly in the riskier Offensive Sectors, while some of the Defensives have made some gains...Technology and Industrials are in a neutral holding pattern.

A break and hold below trendline support on the SPX, XLF, and EEM may see further flight from the Offensive Sectors and into the Defensive Sectors...otherwise, I'd expect to see money flow back into the higher risk Sectors as they continue their trek upwards...ones to watch.

"Chips-N-Dip"

The 30 min chart below of the TF (Russell 2000 E-mini Futures Index) contains a Fibonacci retracement and a Fibonacci fanline drawing. You can see the levels at which buyers have been chipping away at the TF since it rallied last Thursday as price has subsequently dipped on three occasions...853.50, 851.50, and 850.00.

As of today's (Tuesday's) close, the price has bounced back up, once more, and sits just above near-term support at 853.50 (confluence of the 40% Fibonacci retracement level with the 60% Fibonacci fanline, together with the merging 50 and 200 MAs). A break and hold below this level, and particularly 850.00, may signal that a deeper dip is on the way to, potentially, the levels as noted in my post of September 14th for the corresponding Russell 2000 Index. Otherwise, I'd be looking for the rally to resume on a hold above this level. Longer-term upside price projections for the TF are described in my last post.

Super-Size This, New York City! ;-)

"Nature by Numbers" Video

The Fibonacci sequence in nature...

"Big Picture" Fibonacci Projections for the Russell 2000

The Monthly chart below of the TF (Russell 2000 E-mini Futures Index) contains two Fibonacci retracement drawings, two Fibonacci Extension drawings, and a Fibonacci fanline drawing. I've selected the TF, as I consider it to be the "Canary in the Coal Mine" as either a leader/laggard of strength/weakness among the other E-mini Futures Indices (YM, ES & NQ).

Assuming the TF rallies and holds above its all-time high of 872, eventual projected major Fibonacci confluence resistance levels are 950ish, 1050ish, and 1150ish. The timeline for the TF to, potentially, reach these levels is, of course, unknown. However, if one were to assume that price holds above the 50% Fibonacci fanline (heavy broken blue line) (as it has held from the lows of 2009, thus far), and if it hugged the 40% fanline (red broken line), you would see that 950 would be reached by April 2013, 1050 would be reached by December 2013, and 1150 would be reached by August 2014.

For now, they serve as hypothetical targets, with the 50% Fibonacci fanline providing major support on any pullbacks, together with the other Fibonacci confluence levels. Price is currently just below its all-time high and is inside a web of Fibonacci confluence. It may bounce around for awhile before resuming its uptrend...alternatively, we may see an immediate strong push above, as mentioned in my last post, before it, potentially, consolidates or pulls back a bit to hold above what would become major support around 875.

Weekly Support/Resistance Levels -- U.S. $, Bonds & Commodities

The following Weekly charts below depict support and resistance levels for the U.S. $, 30-year Bonds, Gold, Oil, Copper, and Silver.

The U.S. $ is at a minor support level (major support is further below at 78.00), 30-year Bonds are at a major support level and have broken below their "diamond" pattern that has been forming, Gold is approaching major resistance, and Oil, Copper and Silver have reached fairly major resistance. If we see a breach of major support and sell-off in the U.S. $ and Bonds, then we should see Gold, Oil, Copper, and Silver blow through their respective resistance levels...ones to watch to see if recent downside and upside momentum continues, pauses, or reverses in the next few days ahead.

As shown on the two currency graphs below, money continued to flee the U.S. $ this past week (as it has for all of September, so far), and continued to flow into the Euro, Aussie $, British Pound, Swiss Franc, and Canadian $...ones to watch to see if this trend continues over the next days/weeks.

A continued flow into the Euro and the Aussie $ tells me that the European and Chinese financials/indices should also continue to strengthen, as detailed in my last post.

I had mentioned in my post of September 13th, that the SPX and RUT have room to go higher within their rising channels on their respective volatility ratio charts, as shown on the Daily charts below, but had run into near-term horizontal price resistance in the form of triple tops. On Friday, they both opened above this resistance level, but the SPX lost momentum and fell back down below, while the RUT managed to close above, albeit near its low of the day.

Should the SPX and RUT regain upside momentum in the next few days, we may then see a major breakdown in the U.S. $ and the 30-year Bonds, and a further push higher in Gold, Oil, Copper and Silver.

However, in closing and as a caution, I'd note that the following three Daily charts indicate that Stocks Above 20-50-200-Day Averages are near major resistance levels.

While there may be some further thrusts higher in equities, they may pull back soon (possibly around the next Friday's OPEX, or the end of September/3rd Quarter) before resuming any serious push higher...a scenario which should present itself on the above volatility ratio charts.

Money Flow for September Week 2

Further to my last weekly market update, this week's update will look at charts and graphs for:

• 6 Major U.S. Indices
• 9 Major U.S. Sectors
• S&P 500 Index, EU Stoxx 50 Index, and Shanghai Index
• U.S., European, and Chinese Financial ETFs

As can be seen from the following Weekly charts and 1-week graph, all 6 Major Indices closed the week higher.

As shown on the Weekly charts and 1-week graph below, 8 of the 9 Major Sectors closed the week higher...Utilities had a minor loss. The majority of the gains occurred in the riskier, Offensive Sectors.

In light of Thursday's announcement by the Fed to begin a new round of open-ended monetary stimulus, in addition to their current program, and a commitment to keep interest rates low until mid-2015, I'll use a combination of Fibonacci tools to gauge where support and resistance levels lie as the markets react to the news over the next days/weeks/months.  For now, I'll look at Daily charts of just the Dow 30, S&P 500, Nasdaq 100, and Russell 2000 Indices to get a very broad view of the equity markets.

Included on the following four charts are two sets of Fibonacci retracement levels which begin at their June lows and at the September lows of this year. I've shown two additional levels...a 25% and a 75% level (yellow lines) since I also wanted to divide both of these Fibonacci ranges into quarters to see where price falls within each level so that I can determine the level of bullishness/bearishness in this timeframe. I also want to see how much time is spent in each quarter in order to determine the approximate velocity of sentiment...i.e. divide the number of days spent into the price range of the pertinent quarter, which is pretty evident by just glancing at each chart.

Price closed on Friday within the upper 1/4 of both the June and the September ranges. As such, they are short-term and medium-term moderately bullish. Near-term support lies at the September 25% level (i.e. 13484.20 for DJI, 1455.02 for SPX, 2835.10 for NDX, and 852.19 for RUT), followed by each subsequent Fibonacci level of that smaller range.

A break and hold below the 25% level of the June Fibonacci range (i.e. 13248.70 for DJI, 1422.57 for SPX, 2760.01 for NDX, and 833.81 for RUT) would then see the 40/50/60% Fibonacci levels come into play as potential support levels of that larger range.

You can see that the NDX has spent more time in its upper 1/4 of the larger June range than the others, suggesting that Technology weathered September's pullback better than they did.

On a long-term basis, and as can be seen from the first chartgrid above, the NDX is at a new all-time high since its dot-com high in 2000, the RUT is very close to setting an all-time high, and the DJI and SPX are approaching their all-time highs set in 2007, but still have more ground to cover. The markets may not pull back much until those highs are reached.

The next Year-to-date graph shows that the NDX has led in terms of overall percentage gained, whereas the following 10-day graph shows that the RUT leads, so far, for the month of September...two indices to watch to see if weakness enters either one in the short term to, potentially, lead the others down (particularly the RUT since it's just below its all-time high and subject to the forces of major resistance here).

The next Daily chart shows price action over the past 3 years on the U.S., European, and Chinese stock markets, as depicted by the SPX, EURO STOXX 50, and SSEC Indices. The Chinese market has severely diverged/lagged and is one to watch for either a turnaround or further weakness, potentially causing a drag on the other markets.

 

In this regard, I thought it would be prudent to monitor their respective Financial ETFs...XLF, EUFN, and GXC, which are shown on the following 3-year Daily chart. The Chinese Financial ETF is showing more signs of stability in comparison with its Index. In fact, it began to show signs of moving more in tandem with the other two ETFs from the June lows, as shown on the last three charts (from June lows, September's action, and the price action of the past two days).

I'll be following these three ETFs over the next days/weeks to looks for signs of weakness in any one which may influence the strength of the other two in order to gauge, in a broad sense, the market's global sentiment toward and commitment in equities. Any major financial crisis that may arise/worsen in either one of these three countries/unions may spark additional monetary stimulus by the Fed.

Enjoy your weekend and good luck next week!

The President's "First Order" ;-)

What the Bulls Might Be Thinking Today ;-)

Post-Fed Close

Further to my earlier post today (Thursday), here's where the markets closed after the Fed announced a new round of monetary stimulus.

Equities, as represented by the YM, ES, NQ & TF, spiked and made the highest close, so far, this week and this year, on higher volumes. The YM and ES are at/near the top of their rising channel, while the NQ and TF are trading above, as shown on the Daily charts.

The SPX and RUT have room to go higher within their rising channels on their respective volatility ratio charts, but have run into near-term horizontal price resistance (triple tops).

30-Year Bonds are still potentially forming their "diamond" (potentially topping) pattern, as shown on the Weekly chart below...one to watch to see which way the eventual break of the diamond apex occurs and is held. Not shown on this chart is the fact that daily volumes were higher today, while price spiked up and down and closed almost unchanged from the open.

The U.S. $ has reached its lower Bollinger Band on the Weekly chart with near-term support below at 79.00, but major support is further below at 78.00. Not shown on this chart is the fact that daily volumes were higher today, while price closed near its low of the day.

These are some of the charts I'll be watching over the next days/weeks ahead to gauge sentiment (and the velocity of sentiment) in equities, bonds, and the $. For now, the momentum is up in equities, unchanged on Bonds, and down on the $. The path of least resistance for equities seems to be on the upside. I'll post a more comprehensive market assessment this weekend.

We Are Here (just prior to the Fed Announcement)...

As I write this a little over an hour prior to today's Fed announcement, here's where the markets and volatility are at (near the upper end of a rising channel on the first chart, but in the middle of rising channel support/resistance with room to go higher on the volatility ratio charts)...see you on the other side...

Stimulus...The Lifeline for Q3 & Q4 2012

Here's an argument in favour of the Fed providing additional monetary stimulus (new money printing) at their meeting this Thursday...this is purely unbiased...I'm not in favour of or against further stimulus.

The following two graphs show total percentages gained to date for 2012 (includes September 11th closing data) for the six Major Indices and the nine Major Sectors.

The next two graphs show percentages gained/lost for only Q1 of 2012.

The next two graphs show percentages gained/lost for only Q2 of 2012.

 

The next two graphs show percentages gained/lost for only Q3 of 2012...of course Q3 is not finished until the end of this month.

If you're  a fund manager who bought at the beginning of the year, sold at the worst levels of Q2 and have not participated in the Q3 rally, so far, your fund is underperforming miserably. You're going to be praying for the Fed to provide additional monetary stimulus at this next meeting so that you can jump in with both feet and buy at inflated price levels and hope that everyone else does, too...otherwise, you're probably preparing for chaos.

Accurate take on things? Only fund managers in that position can answer that, especially after Thursday. We'll all see the market's reaction for ourselves over the next days/weeks ahead.