Comments in this blog refer to my charts collection found at http://stockcharts.com
For intra-week comments go there, updated more frequently.

Saturday, April 30, 2011

Weekend wrap.

A nice rally to the end of the week and month put new highs on many charts that I follow. Not much to complain about. SPX broke decisively resistance and appears to be on its way to 1400 and beyond.
Russell 2000 printed new all-time high, getting rid of overhead resistance and is trying to squeeze the best out of the remaining favorable season before the summer doldrums hit.
US dollar keeps dropping and got ahead of schedule threatening to land on 71 in a week or two if this free-fall continues, instead of 1 or 2 months. A bounce is expected from that level and that could mess up my timing for gold and commodities which I expected to run well into June.
Gold picked up the pace to the dollar's tune and ended the week and month against the long-time trendline, breakout of which would put it into a steeper trajectory, after eventual correction.
That takes us back to the longer-term dollar chart, that suggests the final bottom in the low 60s.
Silver is getting well to much attention, and truly I do not like it.
Oil is trying to climb over 115 and it is starting to hurt at the gas station.
Natural gas made its move and broke out, making it probably the only commodity around that looks fresh and not loved to death (this sentence has interesting connotations).
It should get to 6 bucks by the summer before required rest and then Fall/Winter rally which I am planning to use to help paying for the heating bills.
In summary, all as expected and a little worry about potential timing issues for the dollar that could influence the commodities and all the rest.

Sunday, April 24, 2011

Weekend wrap.

After an ugly start, this short week turned out really nice, with SPX running by the close on Thursday right up to the resistance at 1337, were, if you look closely, a potential reverse H&N neckline is.

The pattern obviously needs to be confirmed. Once that done the standard upside target would be 1430, with the caveat that measured moves work better with H&S tops and for the consolidations are largely useless and targets tend to be exceeded. What I have for the target on some other charts is 1440-1460.
Russell 2000 is getting ready for new all-time highs, and I am quite curious how this wave will evolve. I have put an outline for an ending diagonal, but it has potential for better rally than that.

US dollar fell again and seems to be aiming at 70-71 by this summer. Potential falling wedge I drew on daily was obviously a fake as expected. Just to repeat my old opinion about wedges that I usually put as disclaimer when drawing them: Wedges are the least reliable patterns and most of the time they morph into a parallel channel, or extend much further than expected, so trading them is an easy way to lose money.
Silver is obviously making a run at the all-time high of 48 and I wish him good luck.
Oil is looking to challenge 147 before its favorable seasonality ends in July.
Natural gas is making nice progress and could break out next week.
In summary, I am expecting higher prices  and not more than minor pullbacks for now.

Saturday, April 23, 2011

Everybody knows (consensus).

Bear with me. There will be no charts or music in this post, just a little rambling.
I do find it truly amazing, how from time to time in a society that is so diverse and divided, all of the sudden a consensus develops. Even more curiously, it is not a benign agreement, but aggressive, malignant consensus, attacking you whenever you try to put the news on or read a paper. Have you turned TV,  radio, or computer on lately? If not, beware. Otherwise, I am sure you could not miss it. It's the latest rendition of America Got Talent, with a strange chorus performance.
The first row of the chorus reciting the wisdom: balance the budget, balance the budget, balance the budget,  are the brewers of the ice tea, a very southern special, made of backwater and folly, sweetened with a spoon of libertarian honey.
The second row is made up of various victims of the hair transplant or hair dying procedures and their accomplices, aging and fattened by corporate lard, having difficulty keep up with the youngsters, just murmuring: kill medicare, kill medicare, kill medicare.
In the third row you will find all the well-meaning spenders of the other people's money (normally called thieves) yelling to the beat: tax the rich, tax the rich, tax the rich.
What brought this curious ensemble together, is the consensus over the solemn idea that the US is bankrupt, and the urge for revelations how to fix the problem.
Now, an obvious question comes through the mind of a skeptic observer: have we finally entered the utopian era when everybody knows what the problem is and even the solution? Is this the world where everybody is smart? Or just we can't spot the idiots?
To a stock market observer, this pitiful consensus is just another sign that the magnificent bull market we have been riding for the past 2 years is entering its final phases. That's all.
My guess would be that just in two years, when another bear market will be at its depths, all this self-confident chorus will be singing to an entirely different tune.

Sunday, April 17, 2011

Weekend wrap.

Stock market is still showing a bullish posture, staging recovery rally after recent mild sell-off brought by failing at resistance SPX 1340 and RUT 850. RUT 856, the old bull-market high from 2007, was briefly penetrated before retracement. That would suggest plentiful energy for the index that should propel it to the new bull-market and all-time highs soon. SPX has also briefly penetrated resistance at 1320 on this recovery run before falling back just under that threshold.
All that said, I am starting my watch for the seasonal top, and putting together some charts helpful  in spotting such event, concentrating on RUT as it is expected to lead the SPX in the topping process/sequence. The following chart (also posted in my charts list) captures both 2007 and the upcoming tentative tops looking at the similarities and differences  between the two.


Another useful chart is the bottom-spotter combing daily SPX and put-call ratio in the background as a histogram. This chart requires interpretation of the PC ratio dependent on a specific market situation, but in general there is no sight of a bottom in a selloff unless PC ratio goes above 1 (1.2-1.3 for bigger selloffs) and the genuity of the bounce is confirmed by PC ratio at least 0.9 (the higher the better).


Another new chart is the oil priced in gold chart, showing that that ratio is half what it was in the Summer of 2008 and the trend is up now, closing on a resistance. ( Oil is twice cheaper in gold that it was then). This chart truly deserves watching because of  implications of this observation. If the oil breaks out against gold, and the gold keeps going higher as the current trend would suggest, by the next summer we all will be longing for the 100 bucks oil. Just very superficially: if gold approaches 2000 and the ratio goes back to the 2008 top, the oil should be around $300.





That leads us back to the energy. I added another chart for natural gas with better snapshot of the current price action. Note the apparent triangle (not an orthodox though). It appears to be coiled enough for an upside breakout that I think is imminent.

In summary, I am expecting bullish continuation for the next few weeks and preparing for much rougher waters ahead.

Sunday, April 10, 2011

Silverado.

I truly, truly dislike saying obvious thing. So, if you live on this planet, you are probably aware that silver had a very nice (but expected) run since August of last year more than doubling and easily outperforming other investments. The run went so well in fact, that silver has met its price target of 40 dollars and is close to the old top from the Hunt brothers era.



This situation certainly deserves some consideration and comments.
It is conceivable, that silver continues to run unabated, particularly in the context of dollar breakdown and gold breakout. However, my suspicion is that the further upside potential for silver is rather limited in the short term and that there are better opportunities within the PM sphere for the next 2 months or so.

HUI, the index of unhedged gold stocks as other PM stocks has terribly underperformed silver, but there is a good chance it is about to change, at least for a while. Looking at the index itself, it looks nice and bullish.








As to when to switch back to the silver itself, the answer is in the charts above as well

Thursday, April 7, 2011

Bear hunt- First Bear sighting.

Well, we have the first bear spotted.



More to follow:







For the Gold Bugs:







Assuming near-perfect repeat of the prior bear, early October or July remains the ETA for the S&P, early March or January for gold and PM stocks and Summer 2012 for oil. Obviously, that's all a major conjecture.