In Honour of Market Action This Week..."Pinball Wizard"

Is Japan's Massive Monetary Stimulus Program Helping its Trade Balance?

I'll let the following graph speak for itself.

Here's the link: http://screencast.com/t/jbHGFxFpcGF

Tech Flu

One has to wonder why Technology is lagging so badly this year, as shown on the Weekly line chart below of the YM, ES, NQ & TF. It was clearly the outperformer last year as it led markets higher.

Perhaps consumers have had their fill of a regurgitation of the 'same-old stuff in a slightly different package' and the economy is already saturated with tech gadgets.

In any event, it's an important part of the economy that is clearly under performing. This may be a warning that, apart from the improving housing sector, all is not well this year.

***NOTE: Inasmuch as there seems to be problem with Blogger today when you click on my charts to enlarge them, here is a link to view this chart properly: http://screencast.com/t/bTPIBvIlp

The Fed Umbrella...

...is still up and markets are still sitting 'high and dry.'

You can find today's FOMC meeting Statement, Economic Projections, Federal Funds Rate, and Chairman Bernanke's Press Conference links here (just click on the file folder to the right of each, then click on the 'latest release' link for further details).

With the Fed supporting these markets with unprecedented monetary easing and stimulus programs, they are sloughing off what would have been considered market-moving negative news in previous  years (including macro-economic news, as well as domestic economic and company earnings and forward-guidance data). It appears that neither fundamentals nor technicals matter anymore.

Forewarned is forearmed.

You can see from the Monthly charts of the Major Indices below that the only two Indices that haven't yet surpassed their 10-year highs are the S&P 500 and the Dow Utilities. The SPX is a breath away, so no doubt, traders are expecting that to be reached...the question is, "What happens next?" Hint -- watch for parabolic moves, which may occur before any further profit-taking occurs, particularly as fund managers prepare for end-of-month/quarter (and the Easter long weekend) window dressing.

VIX Pops on News of the Cyprus Finance Minister's Resignation

As shown on the Daily chart below, the VIX has popped above a confluence of price, Fibonacci fanline, and mid-Bollinger Band resistance, while the SPX dropped to a low of 1541.32 (as at 12:25 pm EST).

We'll see if it holds pending the resolution of the Cyprus bailout situation.

***UPDATE March 20, 2013: One minute the rumours say he's out...next minute the rumours say he's still in...one minute ECB says they're going to bail out Cyprus, and the next minute they're going to delay a decision...it seems we're being subjected to the same rumour-mongering and market manipulations that have emerged countless times over the past several years with respect to Euro-calamities...the saga continues this year.

"Caveat Emptor!"

The Ups and Downs of Zigzags

Like the zigzag roads that the Romans built in order to ascend mountains, the market continues to wind its way upwards, as demonstrated on this 60 min (market hours only) chart of the Russell 2000 E-mini Futures Index (TF).

At the moment (Monday's close), price has been generally confined to the uptrending channel. Until we see that trend broken by a series of lower highs and lows (with deeper drops), we'll likely see that continued, as the markets (backed by the Fed's unprecedented monetary easing and asset purchase programs) seem to be adept at fending off negative global and domestic news and economic events, including perceived threats of negative contagion. In other words, the markets appear to have the mentality of "Id imperfectum manet dum confectum erit." -- "It ain't over until it's over." 

However, the notion that "government 'theft' of bank depositors' savings could not spread to other countries and would not be a concern anyway, because money tied up in the markets is not sitting in a deposit account and is, therefore, safe from a similar fate" would be naive or ill-conceived. The mere fact that this has been conceived for one country is evidence that such a scenario exists for others as an unformed probability and is subject to the irrefutable Laws of the Universe. The Law of Attraction dictates that belief in and acceptance of such a possibility will be attracted to that source. Ultimately, force never ends well and what happens in life is eventually reflected in the markets. 

"Caveat emptor!"

The Penny Has Dropped

After dropping overnight (presumably in response to the bailout conditions of Cyprus), Copper is still trading down near its low of the day. As shown on the Weekly chart below, it has broken below a fairly major uptrend line and both of its 50 and 200 moving averages, is sitting at its Volume Profile POC and lower Bollinger Band, and is just above its lower 1/4 of a longer-term very wide sideways channel.

A drop and hold below today's lows could send price down to 3.20 or lower to 3.00.

As well, should the EUR/USD drop and hold below today's lows, we could see a further drop to around 1.20. At the moment, it has bounced a bit after its overnight plunge, as shown on the Weekly chart below.

The European Financials ETF (EUFN) also gapped down on today's open and is attempting a gap fill up to its Volume Profile POC, as shown on the Weekly chart below. A drop and hold below today's low could send price down to 19.30 or lower to 18.50.

Gold has continued its safe-haven bounce, as shown on the Weekly chart below. Overhead resistance lies around 1630, while near-term support is around 1580. A resolution of either of these levels would likely see a continued move it that direction to the next level of either 1680 above or 1500 below. As long as there is a high degree of uncertainty surrounding Cyprus and the rest of the EU countries, we may see Gold continue to rally for some time.

The following Weekly Gold:USD ratio chart shows the beginnings of relative strength of Gold over the US $ in last week's bounce from major support. With the various indicators beginning to hook up, we may see Gold outperform the dollar for awhile. Today's action is not yet shown on this chart, but I'll post one after today's close.

At the time of writing this post on Monday just after 12:30 pm EST, the following table shows how Major World markets have traded today...the only markets still open are the North and South American markets. You can see that the hardest hit today have been Russia, Japan, Hong Kong, China, Australia, Philippines, and Mexico. Oil services has also taken a hit.

The above markets are the ones I'll be following this week to watch for further reaction to the developing Cyprus bailout situation, along with world banking stocks and indices/ETFs (as well as those markets that I mentioned in my last two Weekly Market Updates here and here). Further weakness in these could produce a drag on the rest of the world markets and vice versa.

***UPDATE AFTER MARKET CLOSE: The following Weekly chart of the GOLD:USD ratio shows that Gold continued to (slightly) outperform the US $ by today's close.

Your Prediction is as Good as Mine ;-)

Money Flow for March Week 2

Further to my last Weekly Market Update, this week's update will look at:

• 6 Major Indices
• 9 Major Sectors

6 Major Indices

As shown on the Weekly charts and the percentage gained/lost graph below of the Major Indices, the largest gains were made this past week by the Dow Transports, followed by the Dow Utilities, the Russell 2000, the Dow 30, and the S&P 500. Only the Nasdaq 100 ended with a minor loss.

9 Major Sectors

As shown on the Weekly charts and the percentage gained/lost graph below of the Major Sectors, the largest gains were made in the Financials sector, followed by Energy, Materials, Health Care, Utilities, and Industrials. Cyclicals were flat, while Technology and Consumer Staples sustained some losses.

I've added two more chartgrids to this week's review. Each candle shown on the following charts of the Major Indices and Major Sectors represents a 1-month options expiration period. The current candle closed on Friday as part of that day's Quadruple Options Witching operation.

You can see that, with the exception of Technology and Utilities, all of them are well into overbought territory on this time period.

The next two charts show the percentage gained for the Major Indices and the Major Sectors from the March 6, 2009 lows to Friday's close.

It's easier to see these gains presented in graph format, as shown below.

The Index leaders from the lows of the financial crisis to date have been the Dow Transports, Nasdaq 100, and the Russell 2000.

The Sector leaders have been the Cyclicals, Financials, Industrials, Materials, and Technology.

Summary

I was reminded of the "pigs wearing lipstick" expression earlier today while watching a piece on TV about product branding. I suppose branding can be applied to almost anything, including stocks and sectors.

In view of what I wrote about earlier this week here, here, and here, I'm left wondering, "Whose lipstick is looking a little too garish and applied with a heavy hand here, dahlink? And, can they withstand more gorging and another whirlwind dance at the ball without applying yet another coat of paint and risk tripping over their tutu?" I'll let each one of you decide for yourself and declare it in the marketplace.

No doubt market participants will be following the results of the next FOMC meeting on March 19/20th (NOTE: the results and forecasts are being released on March 20th at 2:00 pm EST and will be followed by Chairman Bernanke's press conference at 2:30 pm EST).

As well, I'll be watching to see if the Russell 2000 E-mini Futures Index (TF) makes it to 970 by April Fool's Day, as I wrote about here, and to see whether the SPX matches or exceeds its all-time high of 1576.09 any time this coming week.

I'll keep this weekly review (uncharacteristically for me) short and simple and will leave you with a wish for a Happy St. Patrick's Day this Sunday and for prosperity for the coming week.

***UPDATE March 17: In view of what's been taking place during the past several days between the EU/IMF, and Cyprus regarding their bailout conditions, I'll also be keeping a close watch on everything I itemized in the Summary section of my last Weekly Market Update. 

970 by April Fool's Day?

The Russell 2000 E-mini Futures Index (TF) appears to be on track to hit its 200% external Fibonacci retracement level of 970 by April Fool's Day, provided it remains in its uptrending channel, as shown on the 60 min (market hours only) chart below.

Near-term support lies at 930-935...a drop and hold below that level could send it down to 900, or lower.

Sparse Foreign Interest in U.S. Securities

Foreign interest in U.S. securities has been sparse and sporadic since mid-2011, as shown on the graph below. Data released today shows another monthly drop in foreign purchase of U.S. securities.

Inasmuch as "demand for domestic securities and currency demand are directly linked because foreigners must buy the domestic currency to purchase the nation's securities," one has to wonder how much longer the U.S. economy can continue to "recover" and at what pace without increased foreign interest...particularly as the SPX faces this potential scenario.

Meanwhile, the U.S. $ has dropped a bit today and is trading around a confluence of 60% Golden Fibonacci ratios, as shown on the Weekly chart below...one to watch for either a resumption of strength, or for further weakness...major support lies at 82.00.

Loose Purse Strings Last Month

Tech-Lag

It's time for Technology to 'step up to the plate' to support a further rally in other equity sectors...

...as the Fed does their job: http://www.newyorkfed.org/markets/tot_operation_schedule.html

Otherwise, without a continued, sustainable, and, more importantly, believable rally in the stock market at its current 4-year highs, one has to wonder what the whole point of the Fed's POMO program (and their desired "wealth effect") is all about.

High Volumes Above 900 on TF

High volumes on the TF have taken it down from 930 to 900 and back up to almost 940 recently, as shown on the 60 min (market hours only) chart below. However, volumes have also been declining on the latest push above the last gap at 920.70 since the beginning of last week. Whether this is an exhaustion gap remains to be seen, but it could be a warning, along with dwindling volumes, that the TF is running out of steam.

If price does remain in its current channel and makes it to its 200% external Fibonacci level at 970, we may see either a pullback of some sort, or a sideways consolidation, pending its next move. Otherwise, a drop and hold below 930 and the channel could begin a decline to, at least 900, or lower.