Copper breaks support…. weather vane is predicting bearish global weather is ahead!
by Chart School - May 23rd, 2012 10:32 am
Courtesy of Chris Kimble.
CLICK ON CHART TO ENLARGE
Nine days ago the Power of the Pattern suggested that Copper could drag the 500 index lower (see post here)
Copper is often viewed as a predictor of the “Economic Weather” that is about to come. Copper is breaking key support and below is flag pattern at (1) above. In the past Copper breakdowns have suggested a slowing global economy!
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DiggIs Deflation about to pick up speed or has it run its course? Will the yield on the 10-year note break 20-year support?
by Chart School - May 23rd, 2012 9:24 am
Courtesy of Chris Kimble.
Deflation…simply means falling prices.
The 4-pack below reflects that the bond market believes that ”Deflation/Falling Prices” is the key theme as the leading commodity index’s is breaking below last summers lows.
CLICK ON CHART TO ENLARGE
The Power of the Pattern reflected that the Deflation theme setup first took place last June (see set up here) as bearish rising wedges were taking place in the Commodities complex and support was giving way. A year later these patterns have caused the Commodities complex to create a series of lower highs. The CRB is down 22% and the CRX is down 26% since last May’s peak of the bearish rising wedges. These multi-year rising wedges don’t end in just a few months!
So has the Deflation theme run its course and the bottom is in place? The bond players have been pretty spot on, per the global pricing picture. The 10-year yield is on support dating back to the early 1990′s. Watch this line in the sand as close as any of these support lines.
Also don’t forget the situation Copper was in 9 days ago (see post here)…Copper has now broken below this flag pattern!
S&P 500 Snapshot: Rally Fades on Mention of Greek Contingency Planning
by Chart School - May 22nd, 2012 5:35 pm
Courtesy of Doug Short.
The carryover from yesterday’s rally in the S&P 500 dove for cover in the final hour of trading on news that Greece’s former prime minister mentioned contingency planning for a Greek exit from the Euro. The index had reached an intraday high, up 0.95% during the late morning, faded through the afternoon, and sold off during the final hour when the Greek news began circulating. A rally during the last 10 minutes of trading lifted the index out of the red to a 0.05% gain at the close.
The index is now up 4.69% for 2012, which is 7.22% off the interim closing high on April 2nd.
From an intermediate perspective, the S&P 500 is 94.6% above the March 2009 closing low and 15.9% below the nominal all-time high of October 2007.
Below are two charts of the index, with and without the 50 and 200-day moving averages.
For a better sense of how these declines figure into a larger historical context, here’s a long-term view of secular bull and bear markets in the S&P Composite since 1871.
These charts are not intended as a forecast but rather as a way to study the current market in relation to historic market cycles.
Daily Market Commentary: Consolidation
by Chart School - May 22nd, 2012 5:04 pm
Courtesy of Declan Fallon
The S&P closed flat after managing decent gains intraday, but trading volume was relatively light so it’s a mixed bag as to whether the late day drop will be something to worry about. Technicals aren’t even indicating a bullish divergence and the 200-day MA wasn’t tested.
The Nasdaq closed slightly down on yesterday, but it hadn’t achieved the same degree of intraday gains as the S&P so its loss wasn’t as great. Volume wasn’t much different to yesterday. And like the S&P the technical picture is lacking the bullish divergence which might indicate a swing low.
Of greater help to the Nasdaq are the more pronounced bullish divergences in Nasdaq breadth indices like the Percentage of Nasdaq Stocks Above the 50-day MA. There are clear bullish divergence in the MACD histogram and CCI.
Although the Russell 2000 was pegged by past resistance which re-emerged to haunt the index although the 200-day MA held as support.
The semiconductor index didn’t emerge outside of yesterday’s range which probably helps it if you are a bull. Friday’s low is the stop level for those looking to play (what still looks) a trade-worthy bounce to the 200-day MA.
Tomorrow could see another push lower to test the firmness of Monday’s recovery; it may even break the low intraday but I suspect buyers will step in the afternoon as many sectors are heavily oversold.
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Dr. Declan Fallon is the Senior Market Technician and Community Director for Zignals.com.
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European Markets: ‘Don’t Bet Against the EU Summit’
by Chart School - May 22nd, 2012 2:35 pm
Courtesy of Doug Short.
My quick snapshot yesterday of major European markets showed the two major Eurozone peripheral nations, Spain and Italy, as outliers with daily losses, following the grim example of the vanishing market economy of Greece.
Flash forward 24 hours: Today, in advance of Wednesday’s EU summit in Brussels, all the major European markets participated in a strong rally — with Italy and Spain among the leaders. What we’re seeing is perhaps the EU equivalent of “Don’t bet against the Fed.”
Of course, there is one country, not on the leaderboard above, that didn’t share in today’s EU-phoria. That would be Greece, which today set a new interim low at a hair’s breadth away from 90% off its 2007 all-time high.
The Philly Fed ADS Business Conditions Index
by Chart School - May 22nd, 2012 12:35 pm
Courtesy of Doug Short.
Note from dshort: Three months have passed since my last look at this fraternal twin of the Chicago Fed’s National Activity Index, which I reported on yesterday. It’s time for another look.
The Philly Fed’s Aruoba-Diebold-Scotti Business Conditions Index (hereafter the ADS index) is a fascinating but little known real-time indicator of business conditions for the U.S. economy, not just the Third Federal Reserve District, which covers eastern Pennsylvania, southern New Jersey, and Delaware. Thus it is comparable to the better-known Chicago Fed’s National Activity Index, which is updated monthly (more about the comparison below).
Named for the three economists who devised it, the index, as described on its home page, “is designed to track real business conditions at high frequency.”
It is based on six underlying data series:
- Weekly initial jobless claims
- Monthly payroll employment
- Industrial production
- Personal income less transfer payments
- Manufacturing and trade sales
- Quarterly real GDP
The accompanying commentary goes on to explain that “The average value of the ADS index is zero. Progressively bigger positive values indicate progressively better-than-average conditions, whereas progressively more negative values indicate progressively worse-than-average conditions.”
The first chart shows the index based on data inputs since 2000.
For a longer-term perspective here is a 91-day moving average of this daily index since March 1960, the date of the earliest data.
Now let’s compare the Philly Fed’s Business Conditions Index with the Chicago Fed’s National Activity Index (CFNAI), which reaches back to March 1967. (See also my latest monthly update for the CFNAI here.) The CFNAI is based on 85 economic indicators from four categories:
- Production and income
- Employment, unemployment and hours worked
- Personal consumption and housing
- Sales, orders and inventories
For a close look at the four components, see this monthly…
VIX breaks short-term support…500 attempting to break short-term resistance-
by Chart School - May 22nd, 2012 11:36 am
Courtesy of Chris Kimble.
The picture below is a close up of a fly with dew on it in the mornings, by Ondrej Pakan Speaking of a close up view, the VIX is attempting to break support and the 500 is attempting to break resistance in the chart below.
CLICK ON CHART TO ENLARGE
The VIX has increased 50% in value while the 500 index has declined 7%. On a micro/short-term basis did fear levels get a little extended?
The State of Education
by Chart School - May 22nd, 2012 10:35 am
Courtesy of Doug Short.
Last Monday, May 14th, Governor Jerry Brown of California released the state’s revised budget for the 2012-13 fiscal year (FY). The original budget projected a deficit of $9.2 Billion; the revised estimate pushed the gap to $15.7 Billion. The announcement came as something of a shock: a larger deficit was anticipated, but not the magnitude in the revision.
In part, the deteriorating fiscal situation reflects the weakness of the California economy. Housing prices remain depressed and job growth anemic. Continued weakness in employment translates into lower personal income and sales tax revenue for the state. The two account for almost 86 percent of California’s projected revenues in the coming fiscal year. Relative to FY 2011-12, the budget assumes a better than 6 percent increase in income and sales tax revenues. Any future shortfall obviously will exacerbate the shortfall.
If the state’s revenue issues are cyclical, then its expenditure issues are structural ? and, largely problems of its own doing. Public school funding, in particular, has long been a contentious political issue in California. It is as well a problem which has defied a solution. Until a fix acceptable to all involved is adopted, K-12 financing will continue to consume a disproportionate share of general fund expenditures, squeezing other initiatives (higher education) in the process.
The 1971 ruling in the Serrano v. Priest case sparked the state’s growing involvement in the financing of public education. The Serrano decision effectively invalidated the traditional local, property tax based funding of K-12 public education. The ruling compelled politicians in Sacramento, the state capitol, to become more actively engaged in funding primary and secondary education. Over the next forty years, the state has tried with limited success to satisfy the several constituencies (from parents, to teachers, to home owners and local officials) with a stake in the matter. Just as it seems a viable, long-term solution presents itself, one of the parties involved causes the deal to unravel.
Assembly Bill 65 (1977) was the first deal to be undone. No sooner was the law enacted then property owners vetoed the solution by passing Proposition 13 (also known as, the People’s Initiative to Limit Property Taxation). Ten years later the passage…
This high flying market outperformer finds itself on important support-
by Chart School - May 22nd, 2012 10:03 am
Courtesy of Chris Kimble.
On 5/3 the Power of the Pattern reflected in the chart below that RFG had doubled the 500 index’s performance since the 2009 lows and that it had created a pattern that could pull the broad market lower! (see post here)
CLICK ON CHART TO ENLARGE
Since the 5/3 posting, which highlighted a bearish pattern in RFG it has declined 6.7% and the 500 index has declined 5.4% in 19 days. The chart below reflects that RFG is on a key support line that needs to hold!
CLICK ON CHART TO ENLARGE
This high flyer/market leader is on support that is important for this ETF and the broad markets. A break of support in RFG pulled the market lower 19 days ago and did in 2008 as well….RFG’s price action has been important in the past and I suspect it will be in the future!
How a Simple Line Can Improve Your Trading Success
by ilene - May 21st, 2012 7:07 pm
How a Simple Line Can Improve Your Trading Success
Elliott Wave International's Jeffrey Kennedy explains many ways to use this basic tool
By Elliott Wave International
The following trading lesson has been adapted from Jeffrey Kennedy's eBook, Trading the Line — 5 Ways You Can Use Trendlines to Improve Your Trading Decisions. You can download the 14-page eBook here.
"How to draw a trendline" is one of the first things people learn when they study technical analysis. Typically, they quickly move on to more advanced topics and too often discard this simplest of all technical tools.
Yet you'd be amazed at the value a simple line can offer when you analyze a market. As Jeffrey Kennedy, editor of the new Elliott Wave Junctures service, puts it:
"A trendline represents the psychology of the market, specifically, the psychology between the bulls and the bears. If the trendline slopes upward, the bulls are in control. If the trendline slopes downward, the bears are in control. Moreover, the actual angle or slope of a trendline can determine whether or not the market is extremely optimistic or extremely pessimistic."
In other words, a trendline can help you identify the market's trend. Consider this example in the price chart of Google.
That one trendline — drawn between the lows in 2004 and the lows in 2005 — provided support for a number of retracements over the next two years.
That's pretty basic. But there are many more ways to draw trendlines. When a market is in a correction, you can draw a trendline and then draw a parallel line: in turn, these two parallel lines can create a channel that often "contains" the corrective price action. When price breaks out of this channel, there's a good chance the correction is over and the main trend has resumed. Here's an example in a chart of Soybeans. Notice how the upper trendline provided support for the subsequent move.…
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW. She manages the Favorites backup site
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