ES Channel...Will It or Won't It?

UPDATE April 17 @ 12:15 pm EST...it didn't (all 4 e-mini futures indices are outside their uptrending channel now...the TF has erased all gains made from January 22 this year):

More Weak Economic Data & Commodities/Equities Decline

I'd have to say that continuing weak economic data had not been priced into either commodities or equities, as evidenced by today's (Monday's) drop, so far.

No doubt, any large players who were long Gold and other commodities will be forced to dump their equity holdings to cover losses.

Most world indices are deep in negative territory today.

World Market Index Source: http://www.indexq.org/

Gold, Silver, the Commodities Index, and Gold vs. US $

The following Weekly charts of Gold and Silver show that the next major volume support levels, (as depicted in their Volume Profiles along the right side of each chart), are:

• 1360ish for Gold. then 1150ish, and 
• 18.00ish for Silver

And, I'm watching to see how price reacts to the recent bearish "Death Cross" formation on the Commodities Index, as noted in the Weekly chart below. A drop and hold below 800.00 should see lower prices ahead...possibly down to 700.00ish. (Note that although my chart provider has it labeled as the home price index, that is incorrect...it is, in fact, the commodities index.)

And, finally, this Weekly Gold:USD ratio chart shows that price is just below the 200 moving average. Until the indicators reverse their current downtrend, Gold may continue to weaken relative to the US $.

Brakes (and Red Flags) on EU Banking Union

This Reuters article appeared today (Saturday). I've flagged (green and red) what I thought to be important aspects of the article.

• It seems that an EU banking union is not on the front burner, as it first requires a change to the EU treaty.
• Also, note the red flag around Mr. Shaeuble's last remarks...this strikes me as a plain warning for bank depositors. 
• Plus his second-last remarks would seem to indicate that other countries may, indeed, face a fate similar to that imposed on Cyprus.

Money Flow for April Week 2

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

• 6 Major Indices
• 9 Major Sectors
• Commodities, Homebuilders, USD, & USB vs. Major Indices vs. 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 this past week were made in the Nasdaq 100, followed by the S&P 500, Russell 2000, Dow 30, Dow Transports, and Dow Utilities. All are still running in overbought territory on the weekly Stochastics indicator. The S&P 500 finally reached an all-time high and closing high (along with the Dow 30).

9 Major Sectors

As shown on the Weekly charts and the percentage gained/lost graph below of the Major Sectors, the largest gains made this week were in Cyclicals, followed by Health Care, Consumer Staples, Financials, Technology, Industrials, Utilities, Materials, and Energy, as buyers added more 'risk.' All are still running in overbought territory on the weekly Stochastics indicator. 

Commodities, Homebuilders, USD, & USB vs. Major Indices vs. Major Sectors

This week I'm looking at a comparison of percentage gained/lost of a variety of commodities, the Homebuilders Sector, the US $, 30-Year Bonds vs. the Major Indices vs. the Major Sectors.

The first 3 graphs show the timeperiod from the March 6, 2009 lows made by the SPX to today's (Friday's) close.

The second 3 graphs show the Year-to-date timeperiod.

The last graph shows the gains/losses made this past week on only the commodities through to USB, since you can find the 1-week graphs of the Major Indices and Major Sectors above.

In analyzing the above graphs showing their 3 different timeperiods, I would note the following observations:

• The Dow Transports have been playing leap-frog in terms of leadership with the Nasdaq 100 and Russell 2000 during those three timeperiods. 
• Cyclicals and Financials have been strong performers in all three timeperiods; however, the 'defensive' Sectors (Consumer Staples, Health Care & Utilities) have outperformed the other Sectors for 2013.  
• The Homebuilders Sector has been outperforming the commodities during all three timeperiods.  
• Copper was holding up until 2013, but is now trading in negative territory for the Year-to-date timeperiod, as are Lumber, Gold, Silver, Oil, DBC & DBA. 
• Gold, Silver and Oil were particularly hard-hit this week, while Lumber lost 1.34%. 
• The US $ is down 7% from the March 2009 SPX lows, while 30-Year Bonds are up 14%. The US $ is, however, up 3% for 2013, while Bonds are flat for the year...so, a bit of rotation going on this year in these two instruments, while  money was favouring the Large-Cap Indices and Transports, as well as the 'defensive' Sectors.
• However, buying got a bit more aggressive this week in the Technology and Small-Cap Indices, as well as the 'riskier' Sectors. 

Summary

From the above observations, I'd keep an eye on:

• Small-Caps vs. Large-Caps -- relative strength vs. weakness -- as I've mentioned recently in this post, I'd find it difficult to support any kind of sustained buying in equities without a strengthening in Technology and Small-Caps, particularly with the SPX in the vicinity of a 13-year triple-top formation, and with the NDX facing a triple-top, as I described in this post.
• 'Defensive' Sectors vs. 'Riskier' Sectors -- will the recent buying pick up in the 'Riskier' Sectors?
• Transports Index -- will the strength continue?
• Homebuilders Sector -- will it continue rising if Copper and Lumber continue falling?
• If the Homebuilders Sector falls, will the Financials also drop or vice versa?
• Gold, Silver and Oil -- will their recent weakness continue -- if so, will they finally have a negative impact on the Major Indices -- see the "Comparison of SPX, CRX, USD & USB" section in my last Weekly Market Update post -- I made the case for a negative impact on equities if Gold and the CRX continued to drop.
• US $ and 30-Year Bonds -- will bulls abandon these or continue to accumulate them as a potential hedge against an equity downturn?
• The SPX, NDX & RUT vs. their Volatility Indices -- see my post of April 9th -- will they regain control and dominance over volatility as their ratio pairs trade at their respective resistance levels?

Next week (Wednesday at 2:00 pm EST), we'll see the release of the Beige Book information with details on the latest economic conditions, which may offer some clues in answer to my questions. Friday is monthly Options Expiration, so we we may see an increase in volatility during the week as traders rotate out of and into various instruments. And, of course, we're in the midst of earnings season for Q1 of 2013, so we may see added volatility in that regard.

Enjoy your weekend and good luck next week!

Import/Export Prices Still in Downtrend

Data released today (Thursday) shows that import and export prices are still in an overall downtrend from 2009, as shown below.

Data sources: here and here

This downtrend is still in place in spite of the Fed's massive money-printing efforts to reflate prices to those seen leading up to the 2008 financial crisis. The world-wide slowdown in demand has created this downtrend, in spite of the sharp divergence in trend in the stock markets, as shown on the Weekly chart of the SPX below.

This chart definitely does not reflect the reality of this slow-down, as the equity markets seem to be operating solely under the influence of Central Banks around the world, and not on, what used to be, the laws of market supply and demand...they have simply morphed into a 'tool' used by Central Bankers.

In the meantime, the US National Debt continues to accelerate unabated. Since the trend of the markets and this debt continue to rise, it would seem that the markets are simply an accumulation of debt. If you wish to become a holder of debt without seeing increasing demand for actual tangible products, then by all means, continue to buy into this market. At some point, a bigger (and senior) holder than you (Central Banks and banks) will wish to cash in their debt and take payment...that will come from smaller holders...just look to the ECB and Cyprus for a recent example of that scenario.

UPDATE @ 6:00 pm EST - This just tweeted by Bloomberg News...need I say more...

SPX, NDX & RUT vs. Volatility Indices

The following 3 Daily ratio charts show that:

• the SPX is outperforming the VIX, but the ratio is at a major resistance level...the Momentum indicator has just turned positive above the Zero level
• the NDX is struggling to outperform the VXN, and the ratio is at a downtrend resistance and well below a major resistance level...the Momentum indicator has turned up and is just below the Zero level
• the RUT is also struggling to outperform the RVX, and the ratio is well below a downtrend resistance and below two major resistance levels...the Momentum indicator has turned up and is just below the Zero level

I'd conclude from this that it will be important for the Momentum indicator on all three ratios to penetrate and hold above the Zero level as a confirmation of a shift in sentiment towards an expanding appetite for risk by market participants...otherwise, a drop and hold below Zero would indicate that the rally has no sustainability at this time for either the 'defensive' or the 'riskier' stocks and sectors.

The following is a Year-to-date percentage comparison chart of the Dow 30, S&P 500, Nasdaq 100, and Russell 2000 Indices. So far this year, the INDU leads in percentage gained, followed by the SPX, RUT, and NDX. The RUT was the leader until the latter part of March...one to watch for either continued weakness, or strengthening, along with the NDX. 

The markets are favouring the large-cap 'defensive' stocks at these extended levels, as the SPX faces its 13-year triple top potential cannibalization scenario that I described in this recent post. 

Keep an eye on the above-mentioned ratio charts for further clues on risk appetite or risk aversion, as the SPX, NDX and RUT each struggle to regain control and dominance over volatility.

Earnings Due out for Alcoa After Monday's Close

Perhaps today's (Monday's) sideways movements, so far (as of 1:00 pm EST), are indicative of a market-in-waiting for Alcoa's earnings release after the close.

However, in spite of its strong start in January of this year, it has lost all of its gains for the year, plus more, as shown on the 1-Year chart below...not such a great role model for the rest of the markets, in my humble opinion, as it's still well below its 2008, 2010, and 2011 highs (and never even made it up to last year's highs), as shown on the next 5-year chart.

If it's such an 'economic bellweather' for the rest of the markets, as I keep hearing year after year, it's been ringing its (warning) bells, but no one's listening...at the very least, they're not paying attention to what the charts, and, hence, money flow (and low weekly volumes), are saying.

Add caption

National Bank of Greece Extends Its Losses

As of 12:00 pm EST today (Monday), the National Bank of Greece is -10.38%, as shown below on Bloomberg's Top Gainers & Losers in the EURO STOXX Banks (Price) Index.

The next chart shows the steady decline for this bank since October 2012...not a healthy-looking chart, as it has fallen below its 1-year major support level and is displaying major relative weakness compared to the above Banking Index during the same time period.

Without a strong banking system, Greece is poised for further weakness. The Greek Stock Index is attempting to stabilize today at a support level on the Daily timeframe, but is well below its uptrend line on the Weekly timeframe, and major support lies further below at 40.00ish.

These are two instruments worth watching as potential harbingers of things to come with respect to the ongoing EU fiscal/economic/banking saga.

R.I.P., Maggie

Margaret Hilda Thatcher, Baroness Thatcher (October 13, 1925 - April 8, 2013)

Massive World-Wide Tax Haven Data Leak

This article appeared at CBC.ca yesterday.

Perhaps now, world governments can follow up on the information and collect back-taxes, interest on taxes owed, and fines that are legitimately owed for failing to declare this income to shore up their ailing budget deficits and spiraling debts, such as the US National Debt, now over 16.7 Trillion dollars.

We'll see if the political will exists to pursue such an endeavour, or whether it will get tangled up and forgotten in the usual government 'red tape,' or get sent to committees for 'review' (translation: burial). I'm not holding my breath.

Canada's Revenue Agency said today that it will investigate the names on the list if it can get its hands on it...but what politicians say and what they actually do can end up being very different.

It seems to me that all citizens of each of the affected countries are perfectly entitled to ask their government representative what their position is on this matter and what they intend to do about it.

Money Flow for April Week 1

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

• 6 Major Indices
• 9 Major Sectors
• Germany, France, and the PIIGS Indices
• Emerging Markets ETF (EEM) and BRIC Indices & ETF (BKF)
• Canadian, Japanese, British, Australian, and World Markets Indices
• Commodities ETF (DBC), Agricultural ETF (DBA), Gold, Oil, Copper & Silver
• Major Currencies
• Comparison of SPX, Gold, USD & USB
• Comparison of SPX, CRX, USD & USB

6 Major Indices

As shown on the Weekly charts and the percentage gained/lost graph below of the Major Indices, the only gains were made in Utilities, while the Dow 30 was flat, and the Dow Transports made the largest losses, followed by the Russell 2000, Nasdaq 100, and S&P 500.

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 Utilities, followed by Healthcare, and the largest losses were made in Energy, followed by Materials, Industrials, Technology, Financials, Cyclicals, and Consumer Staples. It was definitely a 'risk-off' week, as traders took profits in those sectors.

Germany, France, and the PIIGS Indices

The following percentage gained/lost graph shows that Greece lost the most during the past week, followed by Ireland, Portugal, France, Germany, Spain, and Italy.

Emerging Markets ETF (EEM) and BRIC Indices & ETF (BKF)

The following percentage gained/lost graph shows that the largest losses of the week were made by Russia, followed by EEM, BKF, Brazil, India, and China.

Canadian, Japanese, British, Australian, and World Markets Indices

The following percentage gained/lost graph shows that Japan made a 4% gain on the week, while the largest losses were made by Canada, followed by Britain, Australia, and the World Market Index. As I wrote in my post of April 4th, Canada's commodity-weighted TSX Index has lost all of its gains (and is now negative) for 2013.

Commodities ETF (DBC), Agricultural ETF (DBA), Gold, Oil, Copper & Silver

The following percentage gained/lost graph shows that Oil made the largest losses, followed by Silver, DBC, Copper, Gold, and DBA.

Major Currencies

The following percentage gained/lost graph shows that the largest losses were made by the Yen, followed by the U.S. $, Aussie $, and Canadian $, while the largest gains were made by the Swiss Franc, followed by the Euro, and the British Pound.

Comparison of SPX, Gold, USD & USB

The first comparison chart of the SPX, Gold, the U.S. $, and 30-Year Bonds, shows that, over a 3-year period, Gold has outperformed the other three on a percentage-gained basis. However, as shown on the second 1-year chart, Gold uncoupled from the SPX in November of 2012 and has reached a major support level (horizontal and bottom of its downtrend). It has also been underperforming the U.S. $ since February of this year. As such, Gold is the one to watch to see if further weakness persists below this week's lows, and, if so, it may drag the SPX down with it, as I'll explain below.

Comparison of SPX, CRX, USD & USB

The first comparison chart of the SPX, the Commodities Index, the U.S. $, and 30-Year Bonds, shows that, over a 3-year period, the CRX has lagged the SPX since March of 2012. Whenever it has made a diverging top and subsequently dropped, the SPX eventually followed suit. There was one instance in mid-2011 where the SPX made the divergence, which preceded a drop by both. As you can see, the CRX has made another diverging top this year. The second 1-year chart shows that the CRX has closed at a large triangle support level. A drop and hold below this level could, therefore, drag the SPX down. 

So, along with Gold, the CRX is also one to watch closely over the coming week(s), since a drop and hold below their respective support levels would likely produce a negative drag on the SPX.

Summary

In summary, this week was all about world-wide profit-taking, with the exception of Japan, and weakness in Oil and other Commodities. Throughout the week, I pointed out a variety of weakening 'scenarios' in my Blog, which I won't repeat, but which can be found here. 

As I pointed out in my last post, the shorter-term 4-Hour timeframe uptrending channel has been broken now on the YM, ES, NQ & TF. As well, the NDX & RUT are in the process of forming a very bearish 'Tower Top' pattern on their Weekly timeframe, as is the Dow Transports, and, to a lesser extent, the SPX. The NDX is doing so at an ominous-looking triple top. Once these patterns are confirmed by a lower weekly closing low, I'd expect further weakness ahead. 

So, Technology, Small-Caps, and Transports are ones to watch as leaders in U.S. equity weakness, along with further weakness in the 'riskier' Sectors. As well, Gold and the CRX Index, as well as Canada's TSX Index, are ones to watch for weakness below their immediate major support levels. Further weakness in the other major countries' indices may also negatively affect the U.S. equity markets.

With weakening economic and jobs data of late, the Fed can only do so much. Unless strengthening economic data begins to surface, with supporting investor confidence, the U.S. markets will only inflate artificially without full investor participation. Otherwise, we'll see underlying weakness continue in the equity markets, and any further advancement above their last swing high is bound to be slow and choppy, and, possibly range-bound for long periods of time.

Coming up, we'll see the release of the last Fed meeting minutes in their entirety on Wednesday. I can't imagine we'll see much change from the last minutes, particularly with the slowing economic data that's been coming forward recently.

Enjoy your weekend and good luck next week!