Thursday, May 31, 2012

31 May 2012

 Medium term indicator remains oversold.
Short term indicator is neutral to slightly negative.

I was a little surprised by the strength today until the close happened.  We will have to see what tomorrow brings.  If my short term indicator wants to test its recent lows, it will not be good.

Treasure the people, then the land, and the ruler least of all.
Meng Ke

Wednesday, May 30, 2012

30 May 2012

 Percent of stocks with their 50 day moving average over the 200 is still near high levels.
The third pane down is my commonly used short term oscillator.  Note the bearish divergence between the peaks.  We could finally start to see some real panic on this downleg.  However, if this finds a bottom above the last bottom, that should be considered strength.

Tuesday, May 29, 2012

29 May 2012

 Summation index for medium term still declining.
 Bulls piled in a little too much today.  Back at overbought levels.
However, nothing is extremely overbought or oversold for the shortest and medium term time frames.

Saturday, May 26, 2012

26 May 2012

 Is this indicator marking a bottom and we will continue drifting upwards or are we about to get flushed with a day or two of panic selling.  Red boxes mark where buyers got flushed on the first move up from a "bottom."  Black boxes marked "bottoms" in that indexes continued to rise as they occurred.

 High Yield bonds (JNK) are getting hammered in terms of long term treasuries (TLO).  In the new normal, I"m not sure if this indicates flight to safety or monetary expansion for buying treasuries.
 Medium term remains quite subdued.
 Medium term summation index remains very bearish.
 Short term summation index is tracking the Dow fairly closely.
 After a short rally, we can no longer say the short term indexes are oversold.  The medium term have moved somewhat off their bollinger bands, but the longest term on this chart representing the most recent ~two months compared to the previous ~five months does not yet show an oversold condition.
This is just another image of the short term indicator which is still below recent peaks.

Friday, May 25, 2012

25 May 2012

Must read:  Bubble on the Potomac

Prepare to be disgusted at how much Washington DC is out of touch with the rest of the US, simply because they have the best access to the Olde Faithful printing press located at Marriner Eccles.  I think what bothers me most is just how hedonistic it all seems.  Maybe it is just jealousy on my part.  I don't know.

"The local drugstores seem to devote more shelf space to condoms and pregnancy tests than diapers and formula. (Another big seller at pharmacies: Pedialyte, used as the ultimate hangover cure.)"

“Happy hour is the most important hour of the day,”

“We’re a mecca for young people,” Fuller says. One recent arrival says word has gotten out to new graduates that Washington is where the work is. “It’s a place where a ­liberal-arts major can still get a job,” she says, “because you don’t need a particular skill.”

24 May 2012

Contrarian indicator spiked higher today.  Almost every time it reached this level a short-term pullback was imminent except for around November of 2009.

 The 89 day RSI for the McClellan Summation Index is at very low levels.  Levels that match up with other recent turning points.  The one turning point in red led to a decent rally, but the ensuing collapse after that brought the index to lower levels which is considered bearish in the way I use this index.
Only oversold in the 3rd and 4th panes.  These represent between 5 and 21 trading days.

The last pane is very long term and is not oversold at all.

"Significant changes in the growth rate of money supply, even small ones, impact the financial markets first. Then, they impact changes in the real economy, usually in six to nine months, but in a range of three to 18 months. Usually in about two years in the US, they correlate with changes in the rate of inflation or deflation."
"The leads are long and variable, though the more inflation a society has experienced, history shows, the shorter the time lead will be between a change in money supply growth and the subsequent change in inflation."
Milton Friedman

Wednesday, May 23, 2012

23 May 2012

Today we saw a solid reversal in the indexes off of lows.  Ordinarily this is a bullish phenomenon, but things can always be different.  I currently have very little skin in the game to either direction.

 I don't post this indicator often because it can give the exact opposite signals very close to one another.  This occurs when price is disobeying what the main technical indicators I use are saying.  Generally spikes occur when a movement happens too fast.

 Medium term is still oversold.
 The medium term summation shows its persistent weakness very well.
This spike is what leads to the spike in the contrarian indicator above as this is based solely upon price.  However, many say that price is the best indicator and I agree with that most of the time.  Confidence in turning points go up with this when a low is higher than a previous low.

Tuesday, May 22, 2012

22 May 2012

A good friend asked me about buying gold soon.  The long term maroon descending trendline will have to be overcome for a confident buy, but not one at the best price level as the price has to rise to go through it.

The blue line (50% retracement from the 2008 to 2011 move, target from pennant formation, and resistance from 2010) is the one I picked a long time ago as the bottom for this decline.  I don't know if we will make it before the currency debauchers come out again in June.

Slow stochastics (not pictured) are no longer oversold like they were when the recent bounce in gold started.

All in all, it is still a better price than the 2011 high.  It just depends how picky you want to be.

While we're at it, I wanted to look at silver.  We are very close to the 24 target I specified months ago.  I believe I came up with it from the pennant formation during early 2011 and using fibonacci retracements.

As part of a maturing bull market, the yellow support line must be broken to the downside before we can establish a steeper ascending trendline.  The 23.6% retracement line is around 23.58.

Yes, I know GLD and SLV are not really gold and silver. I recommend physical holdings (maybe physical ETFs) if/when buying the metals.
The shortest term indicators have bounced quite strongly off of lows.  The medium term indicators all remain oversold.

Monday, May 21, 2012

21 May 2012

Still declined in the medium term today, and remains oversold.
Short term had a good bounce today, but remains oversold.

Sunday, May 20, 2012

20 May 2012

Unfortunately a lot of the indicators people post don't include more than a few years.  These go back to 2006 and capture one of the worst bear markets in US history.

As you can see, we have reached extreme oversold levels for all my short (days) and medium (weeks) term indicators.  At times in the past, they did stay around these levels for more than a few days, but generally the spikes downwards are much more narrow than the peaks.

Now all the bulls need is a catalyst..typically a bailout or a rumor of some sort does the trick.

Remember that very strong short and medium term rallies can and do occur even during bear markets.  More often than not, they are stronger than actual bull market rallies in terms of percent increase.

Thursday, May 17, 2012

17 May 2012

 Only during the flash crash from the original Greece crisis and after the US downgrade last summer has this been much lower.
The same applies to the short term indicator.

It appears I was a little early closing my shorts, but I have woken up after bailouts at these levels to being down 10-12% on shorts.  Not much fun so I don't want to play picking up pennies in front of a possible steamroller.

Wednesday, May 16, 2012

16 May 2012

I decided to close most of the short sales that I initiated throughout February and March today.

No, I don't think anything has changed for the US or European economies.  I don't think that all of a sudden European countries can have real growth by politicians waving the magic growth wand of rhetoric.

There is too much debt.  There are too few new suckers to pay off the existing debt with interest (money (debt) that doesn't exist yet)  in order to pay all the banks back, and still pay for the transfer payment programs required to keep the older segments of the population placated.  There has been too much brain drain out of Europe.  The demographics are not favorable.  The place is run by bumbling fools like Hollande.  And most importantly, justice has not been served.

 However, I saw this was getting pretty low.  Actually the fact that it is lower than the previous low is quite bearish.
 This is still above its previous low and is oversold considering the overall lack of panic we have seen.
And the SPY has been tracing out a nice descending wedge, and currently sits on the bottom edge of it.  A 50% retracement would be quite painful to any new shorts.

Plus, that garbage Facebook IPO is Friday.  Wouldn't want to have a bad showing for that.  If you buy it and make money, congratulations.  I don't care about the hype, and wouldn't invest monopoly money or fiat money in it.

Tuesday, May 15, 2012

15 May 2012

Not extremely oversold, but did break below previous low.  

 Nearing previous low for the medium term.
 The medium term summation index continues to be weak.

I don't like talking about political stuff much in here because I think the strength is my charts, and those are a lot easier to update.

However, with the JPM stuff:  The government is saying this is why we need tighter regulations.  So, wait a second, we (investors, businesses, banks) are not allowed to lose money and regulations are going to stop that?  I get it, JPM took a bailout so they shouldn't have been gambling.  However, they shouldn't have been bailed out in the first place.

I've got a few ideas:
1) enforce existing laws and regulations before creating more.
2) let the market perform regulation - bad banks fail, other banks will likely not take same steps immediately
3) break up too big to fail - if something is so big that it is possible to have a gargantuan loss that can broadly affect markets, cause the federal government to throw a hissy fit, and affect the economy, it is probably too big.

For those who haven't seen how we got to "Too Big too Fail"

Monday, May 14, 2012

14 May 2012

As surprising as it may seem, none of the first six timeframes (ranging from 1 day to 34 days) I track is oversold yet.  

All of the indexes that were above previous lows are below the previous lows now except for the percent of stocks over their 40 day moving average.

Gold has been aggressively sold since it broke its long term trendline.  I have made two target predictions on this blog - $1420 and $1250.  I do not think the long term secular bull market is over.

Silver is nearing its trendline from the period late 2008 to late 2010 when it started going up at a higher rate on the heels of QE2.  I don't know if that trendline will hold, but I would imagine it would try bouncing there.  If it doesn't the next target is around 23.  I do not think the long term secular bull market in silver is over either.  Although, looking back, I should have considered selling my physical at 48 when I mentioned that it was a dumb time to be buying.

"Enjoy present pleasures in such a way as not to injure future ones."
Seneca (5 B.C. - 65 A.D.)

Saturday, May 12, 2012

12 May 2012

No time frame is oversold.  The white lines in the bottom two panes are intended to indicate that each rally since 2009 has been just a little weaker in terms of breadth.
 Advance / Decline line still not below April 10th value.  Indicates some strength.
 McClellan Summation has made a new low slightly.  Indicates some weakness.  Note the still high RSI level in the bottom pane.
 Not a new low in the percent of stocks above 200 day moving average. This indicates some strength, but this can rapidly change.
The percent of stocks above their 40 day moving average has remained quite a bit higher than the April 10 low.  Implications are the same as above.

Thursday, May 10, 2012

10 May 2012

 Bears +1 for the longer term.
 Bulls +1 for the medium term.  I like that this hasn't went below the lows from April yet.
Bulls +1 for short term.  Still in oversold territory and didn't go below April low.

On one hand, it seems like we are seeing strength, but it kind of also feels like no one cares enough to panic and sell.  We have only had a few near 1% losses during the recent decline.  There has been nothing violent at all which seems a little complacent with Spanish bonds are over 6% again.  Also, we are still extremely overbought using my long term indicator.

In short, I don't really have strong feelings either way, but you can see what the numbers above are telling you.

The JPM news wasn't good for futures after hours.  We will have to see what impact it has on regular trading hours tomorrow.

Wednesday, May 9, 2012

9 May 2012

 As long as this is above the previous low, this should be considered strength once it turns the other direction.  Yes, really.  I'm not a perma-bear.
 This reflects a little more weakness than the above chart.
 This slightly decreased today.  This could be considered oversold, but there doesn't seem to be much impulse to lift it much.
Bearish triple peak on the short term summation index.

Spain's banks STD and BBVA are nearing 2009 lows.  I expect them to challenge those price ranges.

Learned about a new superfood today:
Impressive array of nutrients.  The trees apparently grow rapidly and every last part of them is edible.  If you've got a lawn, plant one.