XLF Narrowly Averts Bearish "Death Cross" Formation (for now)

XLF, the Financials ETF, is currently trading in a "triangle within a triangle," as shown on the Daily chart below. I'll be watching to see if price pushes and holds above the smaller one. Apex support is at 14.74ish and Apex resistance is at 15.20ish. Also, a bearish "Death Cross" formation has been narrowly averted, so far.

Strengthening Financials are important to any further advance on the S&P 500 Index, in my opinion, and this ETF is one to watch over the next days/weeks, particularly since it is still trading in the October 2008 lows and has never recovered to the 2007 high of 38.15.

Intraday Update on Russell 2000 and S&P 500 Indices

The Russell 2000 Index is in demand, so far, today, as shown on the one-day comparison chart below with its fellow Major Indices.

The RUT:RVX (Russell 2000 Volatility Index) Daily ratio chart below shows that the Russell closed above its downtrend resistance line yesterday and has advanced further, so far, today. The question is, can it hold onto its gains by the close today, and thereafter?

The SPX:VIX Daily ratio chart below shows the S&P 500 Index near the top of this week's action, so far, today...one to watch to see if it can advance and hold above its near-term resistance level of 92.50.



Money Flow for August Week 1

Further to my last weekly market update, this week's update will look at the six Major Indices and nine Major Sectors in a very simplistic Year-to-Date line format, as shown on the two chartgrids below.

I like to look at this type of format when I get confusing signals from short-term, day-to-day choppy, whippy, and volatile price action in tight ranges. My conclusions will be based on the daily closes, rather than on candle highs, lows, and closes.

All of them, with the exception of the Dow Transports and Russell 2000 Indices, have been trending higher on their closes since their June closing lows in a fairly tight channel. However, even the Transports and Russell are still above their June lows All of them, except the Energy Sector, are above their January closing lows...the Materials Sector and Dow Transports Index are only just above their January lows. This tells me that the June closing lows are very important and could mark the bull/bear "Line-in-the-Sand" level for 2012 for each of these Indices and Sectors, and it may have marked the beginning of a rally that could last until the end of this year. I am, however, mindful of the headwinds that face the markets, as mentioned in my last weekly update, as well as my posts of July 31st and August 2nd...these could very well keep the markets choppy and volatile for the remainder of the year.

However, looking at these markets on a Weekly basis, I'd conclude that inasmuch as the current momentum is clearly still up with a higher swing closing low, and since the VIX is now at a very low close (as shown on the last chart), each of these Indices and Sectors has the potential to continue a rally next week in a measured move similar to its last swing move up in this channel, at minimum, and possibly more. In this regard, the minimum potential upside CLOSING targets for next Friday are as follows:

Major Indices:

• Dow 30 = 13336
• S&P 500 = 1413
• Dow Transports = 5177
• Nasdaq 100 = 2723
• Russell 200 = 795
• Dow Utilities = 502

Major Sectors:

• Consumer Discretionary (XLY) = 44.91
• Technology (XLK) = 30.15
• Industrials (XLI) = 36.81
• Materials (XLB) = 35.95
• Energy (XLE) = 72.20
• Consumer Staples (XLP) = 36.32
• Health Care (XLV) = 39.49
• Utilities (XLU) = 38.58
• Financials (XLF) = 15.02

Of course, we still have the potential for a dip before any further rallying occurs, which may be due to an unforeseen news-related event. I'd look to see if this past week's closing low holds as a signal that this current upside momentum has not been broken.

P.S. Since I've referred to the Russell 2000 as the "Canary in the Coal Mine" in recent posts, and, inasmuch as the Russell 2000 is lagging the other Major Indices in strength, it may be worth watching the RUT:RVX (Russell 2000 Volatility Index) ratio chart to see if volatility in the Russell 2000 increases or decreases and to what degree...please see the 10-Year Monthly and Year-to-Date Daily charts below.

Enjoy your weekend and good luck next week!

3-Day Update on the Major Indices

Each candle on the charts below on the Dow 30, Dow Utilities, Dow Transports, S&P 500, Nasdaq 100, and Russell 2000 Indices represents three days. The current candle closed today (Thursday).

Each index is in a tightly-bound upward-sloping range, except for the Transports and Russell, whose range is sloping down. The current candle is a either a "Dark Cloud Cover", or a "Bearish Harami," which can signal a future bearish trend...the candle on the Russell is, simply, bearish...ones to watch for possible further weakness.

A Look at July's Global Economic Contraction

The data and graphs in this link show weakening global economic data, rising unemployment, and a lack of consumer confidence for July 2012:
http://strawberryblondesmarketsummaryextras.blogspot.ca/p/global-economic-contraction.html

These problems pose difficulties for businesses to try and grow their way out of without real support from government fiscal and economic policies and actions...and not just temporary Central Bank monetary stimulus programs.

At some point, the U.S. markets will reflect this weakness, as noted in my post of July 30th.

Consumers All Shopped Out Amidst Rising Prices

Data for Store Sales released today shows that consumers reigned in their spending for the week, "driving the year-on-year to only +1.8% for one of the lowest rates of the recovery."

This was is spite of a rise in Personal Income for the month, while the price of goods (and housing) rose. Perhaps buyers are waiting for "back-to-school" sales before they part with any extra cash...or even paying off debt.

So far today, the credit card stocks are down from yesterday's close, as Visa pulls back from yesterday's all-time high...ones to watch for any further weakness developing.

The Fate of the Major Indices in Q3 of 2012

Further to my post of June 29th, I thought I'd show where the Dow 30, S&P 500, Nasdaq 100, and Russell 2000 Indices are currently trading in their 2012 Q3 timeframe relative to the prior quarters. In that post, I mentioned that if the Q3 candle retested the Q1 lows again, I'd be very skeptical of much of a convincing advance above this year's high during these three months.

As can be seen on the updated Quarterly charts below, the current Q3 candle did, indeed pullback, but hasn't quite retreated to the Q2 lows, although the Nasdaq came close. Instead, an "inside" candle has formed, with price near the top on the Dow, S&P, and Nasdaq. The Russell is the laggard in roughly the middle.

As you can see, with the exception of the Nasdaq, these markets are trading in the vicinity of their price levels of the pre-2007/08 financial collapse and face major resistance up to their all-time highs. The candle action, so far for Q3 tells me that markets are attempting to garner bull support to advance further and retest those all-time highs. However, a failure to rally and hold above this year's highs will tell me that these markets are, indeed, weak at these levels, and will likely fall back, possibly to the middle of their large trading range (retreat to their "mean').

Due to the increasing weakness and unemployment problems that the global economies are facing, along with ever-surfacing financial improprieties (all of these problems have escalated since 2007/08), and the impending "Fiscal Cliff" in the U.S., it's my opinion that the latter is the more likely scenario without a concerted global intervention that addresses all economic, fiscal, and monetary problems as a complete package...and, by this, I mean real action and not just empty innuendos and temporary monetary tactics by world bank and political leaders...the sluggish and choppy action on the Q2 and Q3 candles confirms this lack of confidence by market participants at the 2007/08 levels.

Money Flow for July Week 4

Further to my last weekly market update, this week's update will look at the Major Indices and Major Sectors to assess strength vs. weakness in these groups during the past week.

The Weekly chartgrid below of the YM, ES, NQ and TF shows that price has been locked in a tight upward-sloping trading range from their June lows, with market action see-sawing back and forth each week.

This is the first week since that time that all four E-mini Futures Indices have closed above the mid-Bollinger Band (for today's exercise, I'll refer to this point as their "mean" on the Weekly timeframe). All four closed near their weekly high.

The Weekly chartgrid below of the nine Major Sectors shows the same weekly roller-coaster action...XLY (Consumer Discretionary), XLK (Technology), XLI (Industrials), XLB (Materials), XLE (Energy), XLP (Consumer Staples), XLV (Health Care), XLU (Utilities), and XLF (Financials).
Seven of the nine Sectors closed above the mid-Bollinger Band ("mean") (four of them for the first time since their June lows -- XLY, XLK, XLI and XLE)...the two exceptions are XLB and XLF, which closed just below. All of them closed near their weekly high.

The 4-Hour chartgrid below of the YM, ES, NQ and TF shows a close-up of this trading range. You can see that price bounced off the lower end of the range, which happens to coincide with a 50/50% Fibonacci fanline bisecting confluence level (horizontal broken blue line) on the YM and ES, while the bottom of the range is below this level on the NQ and TF.

Further to my post of July 19th, the Daily chart shown below depicts action of the SPX:VIX ratio pair from the beginning of this year.  In that post, I had mentioned that if the SPX was to move higher, it would have to remain above a potential Inverse Head & Shoulders neckline at 82.50ish.

After this week's wild gapping move to the downside, followed by two successive gaps to the upside, price closed just above this level at 82.99. With any more moves below this neckline, the argument for a further and sustainable move to the upside becomes weakened and will cause me to re-think that this is not a valid IH&S formation, particularly since a lower swing low (and lower right shoulder) has now formed on this timeframe.

In summary, lest the markets fall prey to continued whippy, non-trending, roller-coaster action next week, and to convince us that a sustainable move upward has, in fact, begun in earnest (and not based on rumours and innuendos), it is important that the four E-mini Futures Indices, the nine Major Sectors, and the SPX:VIX ratio pair continue to move upward from Friday's close. Headwinds which may present problems for the U.S. markets are outlined in my posts of July 20th, July 19th, and July 17th and will need to be overcome in the process. We have interest rate decisions forthcoming from the FOMC on Wednesday, and the BOE and ECB on Thursday, as well as the U.S. Unemployment Rate release on Friday.

Buckle up...it's bound to be an interesting ride!

Enjoy your weekend and good luck next week!

Will the 2012 Olympics Solve Britain's Debt Woes?

The 2012 Olympic Games will open this Friday in London, England. This news article mentions a cost to the British taxpayer of more than nine billion pounds, with a hoped-for return of 13 billion pounds over four years (as suggested by Prime Minister David Cameron). This seems like a pretty big gamble "at a time when Britons are struggling with a double-dip recession, rising unemployment and severe public spending cuts."

Data released on Wednesday shows that Britain's GDP dropped further into negative territory at levels seen in mid-2009, as shown on the graph below.

The Daily chart below of London's FTSE Index shows market action as at Tuesday's close of 5499.23. Major support lies at 5500, at the moment, and market action from mid-2011 is, basically, in a large trading range, defined by a triangle...in fact, this range extends back to 2009-2010 and is forming a large diamond pattern...potentially a topping pattern with a 1300 point range.

A drop and hold below this diamond could very well send London's equity index tumbling, possibly by 1300 points from 5500 down to the 4200 level, or lower...one to watch, along with future GDP data releases, as well as Libor fallout, over the coming weeks.

Oil's Slippery Ride

Further to my post of July 17th, once again, Oil finds itself testing rising channel support on the Weekly chart below. At the moment, it's trading in between the 50 sma (red) and the 200 sma (pink) in an attempt to break out of this range either to the upside or the downside. Its recent rally didn't quite make it all the way up to the "mean" (mid-Bollinger Band).

However, price on the Commodities ETF (DBC) and the AUD/USD forex pair Weekly charts below did manage to rally up to push slightly beyond their "mean", but pulled back to it on DBC and just above on AUD/USD in Monday's action.

A failure to hold the channel support on Oil and the "mean" on DBC and AUD/USD could well send all of these back down to their lower Bollinger Band or lower. A move lower could negatively influence equities.

In this regard, 64.00 to 72.50 represents an important confluence zone for the SPX:VIX ratio pair....price closed just above 72.50 on Monday. A break and hold above 72.50 would send the SPX higher to, potentially, the last swing high, or higher, while a break and hold below 64.00 would send it lower to, potentially, the June lows, or lower...worth watching to gauge either a strengthening or further weakening in equities.

Money Flow for July Week 3

The markets have lost much of their glossy sparkle during the past one-year period, both globally and in the U.S, and are in need of a major "touchup."

Further to my last weekly market update, this week's update will take a look at global and domestic markets to assess strength vs. weakness in each group during the past one-year period, as well as the past week.

Below are a series of one-year Daily charts, graphs depicting money flow for a one-year period, as well as graphs depicting money flow for the past week, together with general commentary on each grouping.

Group 1 features the U.S. Major Indices. You can see from the chart and the first graph that the Utilities Index is leading in strength for the one-year period, while the Nasdaq 100 Index took over the lead during this past week. The laggards for the year, and for the past week, are the Russell 2000 and Dow Transports Indices.

Group 2 features the 9 U.S. Major Sectors. The overall Sector leaders for the one-year period are Utilities, Consumer Staples, and Health Care (the defensive sectors), while Energy, Materials, and Technology gained the most during the past week. The laggards for the year are Financials, Energy, Materials, and Industrials...and for the week are Financials and Consumer Staples.

Group 3 features Germany and France, as well as the PIIGS countries (Portugal, Italy, Ireland, Greece, and Spain).  The only country to have gained during the one-year period is Ireland, while there were some minor gains in Greece, Germany, Ireland, and France during the past week. The biggest loser during the past year is Greece, followed by Spain, Italy, Portugal, France, and Germany...and during the  past week is Spain, followed by Italy, and Portugal.

Group 4 features the Emerging Markets Sector (EEM) and the BRIC countries (Brazil, Russia, India, and China). None of the countries nor EEM have made any gains during the one-year period, while Russia and EEM made some gains during the past week. The biggest loser for the year is Russia, followed by China, EEM, Brazil, and India...and for the past week is China, followed by India, and Brazil.

Group 5 features the Canadian ($TSX), Japanese ($NIKK), and World Indices. All of these three are lower than they were one year ago, while gains were made in the World Index and Canada during the past week. The biggest loser during the past year is the World Index, followed by Japan, and Canada...and for the past week is Japan.

Group 6 features the Commodities ETF (DBC), Agricultural ETF (DBA), Gold, Oil (see my posts of July 17th and July 11th for recent references to Oil), Copper, and Silver. All of these are lower than they were one year ago, while gains were made in Oil, DBC, and DBA during the past week. The biggest loser during the past year is Silver, followed by Copper, Commodities, Agriculture, Oil, and Gold...and for the past week is Copper, followed by Gold.

Group 7 features the 7 Major Currencies (U.S. $, Euro, Canadian $, Aussie $, British Pound, Japanese Yen, and Swiss Franc). The U.S. $ has performed the strongest over the one-year period, while gains were made in the Aussie $, Japanese Yen, British Pound, Canadian $, and U.S. $ during the past week. The biggest loser during the past year is the Swiss Franc, followed by the Euro, Canadian $, Aussie $, and British Pound...and for the past week is the Swiss Franc and Euro.

In summary, the markets have been playing defensively over the past one-year period, with the majority of the money flowing into the U.S. $, Utilities, Consumer Staples, Health Care, Nasdaq 100 Index, S&P 500 Index, and Dow 30 Index. Hardest hit during the past year have been Europe, the PIIGS, the BRIC countries and EEM, Silver, Copper, the Swiss Franc, the Euro, Japan, Canada, the Russell 2000 Index, and Dow Transports Index. As such, there has been more weakness, world-wide, than strength during the past year. The one-year leaders are the ones to watch to see if this relative strength continues, or if they begin to weaken.

During the past week, some money has begun to flow into the Aussie $, Japanese Yen, British Pound, and Canadian Dollar, the more risky Sectors such as Energy, Materials, Technology, Industrials, and Consumer Discretionary, Greece, Germany, France, Russia, EEM, the World Index, Canada, Oil, Commodities, and Agriculture...ones to watch to see if this inflow of money continues next week and beyond (perhaps into the next FOMC meeting on July31/August 1st). Headwinds which may present problems for the U.S. markets are outlined in my posts of July 20th, July 19th, and July 17th and will need to be overcome in the process.

Enjoy your weekend and good luck next week!

Free Advice ;-)