happy charts

[happy]

This too:

 

 

Indeed. USD/JPY is currently in the process of testing an already penetrated 62.8% fan-line going back to the 2007 high in USD/JPY.

 

[happy]

While it remains to be seen what kind of low we have seen in Gold, the Gold/Silver and Gold/Gold Stocks ratios might be worth keeping an eye on to give us an early clue/confirmation. At least at this stage, while clearly stretched, there aren't great reasons for optimism yet (with the possible exception of divergence between Gold and Gold Stocks).

 

 

GLD/SLV (weekly)

 

 

 

 

GLD/GDX (weekly)

 

[happy]

A brief update on Silver: some problematic price action on the 1 hour chart. Although price remains in upward sloping channel, it remains to be seen whether this develops into yet another bear flag scenario. In the short term, yesterday's correction broke through the 62.8% fan line and failure to reverse this would argue for a move back down to (new?) lows.

 

[happy]

Yes, although at this stage I'd expect a correction more akin to the July-August 2007 or May-June 2011 corrections (which would make the 14,000 +/- area indicated a prime target).

 

The magnitude of the current divergence is not huge, and strictly speaking, it could still be negated if prices were to power ahead from here ... however, given that price is bumping up against resistance/rising trend line I think this is unlikely.

 

Ideally, for the "resumption of the bear" scenario, we would see a mild correction here, followed by either: a lower high into the fall (e.g., May / Jul 2011 scenario), or: a higher high with more pronounced divergence (e.g., Jul / Oct 2007 scenario). Note: this by no means guarantees the resumption of the bear.

 

So far we seem to be following the Jul/Oct 2007 set up ... but again, this does not guarantee a repeat of the 2007 scenario. E.g., see: The Is-This-2007 Meme. Still, should we see a more sizeable correction develop, the 14,000 looks like important support.

 

[happy]

Update on the Aussie: price has been slicing through butter like a hot knife.

 

In the context of the rise from 2009 low we have broken the 61.8% fan line. This is generally an important line to keep track of as violation of the line effectively "confirms" the 2011 top / establishes a new downtrend.

 

Ideally we would see a "test" and "rejection" of the 61.8% fan line to seal the deal (see close up below). Looking at the C.O.T. data (at extremes) suggests that we are due a bounce soon. It remains to be seen whether the anticipated bounce turns out to be of the dead cat variety or manages to recapture the 61.8% fan line.

 

 

 

C.O.T. data:

 

 

 

 

Checking up on the Aussie Dollar: we got the test and rejection of the 62.8% fan line followed by a further breakdown. Despite strong action last week, price action continues to look weak. Price will need to close above resistance (~ 93.00) before the AUD can start to form something of a base.

 

 

And a good lesson that stretched sentiment and COT can easily stretch further ... updated COT:

 

 

 

Meanwhile, relative to JPY the AUD took out the first 38.2% fan line ... as well as breaking horizontal resistance around the 0.900 mark.

 

 

And relative to EUR the AUD touched and rejected the important 62.8% fan line. A break of this line would confirm the 2012 high and project further weakness. Note, a break of horizontal support around 0.650 would also bode ill for the Aussie.

 

[happy]

Over the last several days we've seen some spectacular price action in the precious metals sector (especially Silver). Some charts to review the recent action:

 

Silver (weekly): Silver bounced from noted support zone. Currently targeting (formidable) resistance around the $26 mark.

 

 

SLV (daily): On a shorter term time frame, current price action looks like it has formed an "island reversal". Also encouraging for the bulls is the explosion in volume. However, for the moment, price is bumping up against the 38.2% fan-line which generally represents resistance. A successful breach of the 38.2% line would target the 50% line currently around 24.50 level. In order to confirm the June 2013 low (in the context of the October 2012- June 2013 correction) we would want to see a breach of the 62.8% line, which is currently around the 26.75 level.

 

 

Although current price action looks positive and the June low may well prove to be "the" low, we still need to see further positive price action in order to confirm the low from the 2011 peak. Using the fan-line approach to define overall trend, we would currently need to see a close above ~ $37.00 in Silver to confirm the 2013 low.

 

[happy]

And a brief look at Silver Wheaton which has had a spectacular several days ...

 

SLW (weekly, arithmetic):

 

 

 

SLW (daily): Daily price action looks constructive. We saw a successful test of support = higher low, followed by a ferocious rally on high volume. After brief hesitation at the 38.2% fan-line resistance (also = horizontal resistance from the May and June highs) price has continued to rally and is now bumping up against 50% fan-line resistance. In order to confirm the June 2013 low (in the context of the November 2012 - June 2013 correction) we would want to see a successful breach of the 62.8% fan-line, currently around 30.00 and change.

 

[happy]

Finally, a look at the Gold/Silver (GLD:SLV) and Gold/GoldStocks (GLD:GDX) ratios ...

 

 

GLD/SLV (weekly): this weeks action has broken horizontal support which is generally a bullish sign for the sector. However, currently the ratio is sitting at the 38.2% fanline support. We would want to see this taken out to further the bullish case for the recent rally.

 

 

GLD/GDX (weekly): much the same as the GLD/SLV chart, following negative divergence we have broken horizontal support (= bullish), however are currently sitting on 38.2% fan-line support which needs to be taken out to embolden the bulls.

 

[happy]

Interesting looking chart:

 

BAL (Cotton Total Return ETN)

 

 

 

And on the topic of agricultural commodities . . .

 

RJA (Rogers Agricultural Commodities Index): too early to tell, i.e., price action remains in well defined down trend, however good looking (and in tact) support level (= attractive risk reward entry?)

 

[happy]

The narrative regarding global capital flows exiting emerging markets and flowing back to the US has been gaining momentum for some time (e.g., Bloomberg headline: 'Clouds gather over Asian economies as Capital flows back to US') ... but, despite the headlines, the following charts don't paint a pretty picture:

 

Chile vs Copper

 

 

Brazil

 

[happy]

pretty much summarizes the picture:

 

 

EEM (Emerging Markets iShares)

 

 

 

or, conversely:

 

EUM (SHORT Emerging Markets iShares)

 

[happy]

more emerging/frontier markets ... ouch!

 

EIDO (Indonesia)

 

EPHE (Philippines)

 

INDY (India)

 

 

... meanwhile, looks like the REIT/Real Estate sector has run into a spot of bother too:

 

 

 

... and bonds:

 

[notanewmember]

^Those charts concern me.

 

It always starts in the frontier markets that are the bell weather in each downturn. It may lead to nothing this time. But usually investors in the West pull money out of riskier/developing markets, as there is a problem at home, perhaps it is a shortage of cash, or some problem that will reveal itself later. I think of the The Asian Tigers of 1997, The Celtic Tiger of 2007 and Peter Schiffs investments in non-US markets got battered in 2007 too (EuroPacific - he saw trouble coming in 2007 but thought the Euro / Pacific investments would be a safe haven) - better batten down the hatches!

 

Are we about to return to another phase of "Risk Off?"

[happy]

^Those charts concern me.

 

It always starts in the frontier markets that are the bell weather in each downturn. It may lead to nothing this time. But usually investors in the West pull money out of riskier/developing markets, as there is a problem at home, perhaps it is a shortage of cash, or some problem that will reveal itself later. I think of the The Asian Tigers of 1997, The Celtic Tiger of 2007 and Peter Schiffs investments in non-US markets got battered in 2007 too (EuroPacific - he saw trouble coming in 2007 but thought the Euro / Pacific investments would be a safe haven) - better batten down the hatches!

 

Indeed.

 

However, unlike 2007-08, emerging markets have been grinding lower since 2011, in some cases even since 2010. Nonetheless, downside action is definitely gaining momentum as a lot of horizontal shelf support is being broken.

 

Another look at the Dow Jones (currently sitting on an ascending trend line that has previously offered some support/resistance):

 

 

I previously suggested that current price action exhibited similarities with the 2007 rolling top and the 2011 correction. While the analogy still holds, it remains unclear which scenario provides the better road map. If we number the peaks and troughs of the respective topping periods we can see that the important point of difference only emerges in the '7' to '8' leg, i.e., whether the move to '8' takes out the '6' low, or whether '8' establishes a higher low. Maybe something worth keeping an eye on? If current chart action continues to correspond to these scenario's then it seems likely that the 14,000 level on the Dow will be important in determining which road we are on.

 

 

 

 

- - - - -

 

more on the 2007 similarities:

 

Yelnick: The Is-This-2007 Meme

 

Hussman: Rock-A-Bye Baby

 

 

If you examine the 2000 and 2007 tops (and most market peaks outside of the “V-top” ones like 1987) you’ll notice the churn both before and after what turned out in hindsight to be the final peak. The S&P 500 experienced a correction of more than 10% in Jul-Oct 1999 that was then fully recovered, another 10% correction in Jan-Feb 2000 that was then fully recovered, another 10% correction in March-May 2000 that was fully recovered, and a final high in September after which the S&P 500 was cut in half. Likewise in 2007, a 10% correction in Jul-Aug was fully recovered by the October 9, 2007 peak, and the first 10% correction off the peak was followed by a 7% recovery into December before the market began to decline in earnest. Even then, once the market had lost 20% in March 2008, it mounted a nearly 12% advance by May 2008, as a further loss of more than 50% lay ahead.

 

It was this sort of rolling top, with intermittent corrections being followed by recoveries to yet further marginal highs, that prompted this quote from Barron’s magazine just before the 1969-1970 bear market plunge:

 

“The failure of the general market to decline during the past year despite its obvious vulnerability, as well as the emergence of new investment characteristics, has caused investors to believe that the U.S. has entered a new investment era to which the old guidelines no longer apply. Many have now come to believe that market risk is no longer a realistic consideration, while the risk of being underinvested or in cash and missing opportunities exceeds any other.”

 

[Van]

Been looking at the main indices charts. Many are now touching on their 144dma (which themselves are flattening out). V-tops are much more uncommon than bottoms. Top formations usually take the form of wild gyrations as the market tries to consolidate and sucker more people in.

 

Sharpening the short-sided knives..

[happy]

Been looking at the main indices charts. Many are now touching on their 144dma (which themselves are flattening out). V-tops are much more uncommon than bottoms. Top formations usually take the form of wild gyrations as the market tries to consolidate and sucker more people in.

 

Sharpening the short-sided knives..

 

^ very true.

 

Best to take it one step at a time. I'm unsure whether the correction we currently seem to be entering will end up on a scale comparable to the 2000-02 or 2007-09 corrections (i.e., 1960s-70s scenario) or whether we are due a relatively mild correction before a new bull (i.e., late 1940s scenario). Wait and see.

 

 

1970s scenario:

 

 

vs

 

 

 

1940s scenario:

 

 

vs

 

[happy]

Pain Trade Is Higher as Risky Season Approaches: Technical Analyst

 

It has been said that markets will always deliver the maximum amount of punishment to the broadest amount of people. If you support this belief, then right now the so-called "pain trade" would be for stocks to keep rising and bonds to keep falling; exactly opposite of what most investors expect.

 

"The pain trade could certainly be higher," says Dan Wantrobski, director of technical research at Janney Capital, in the attached video. "The number one [question] I get on the desk is, 'what can I short, what should I sell?'"

 

And he's not alone. The Wall Street Journal today highlights the pain that is being inflicted on short-sellers, while fresh CBOE data shows 62% of the open interest is in put contracts, or bearish bets on S&P 500 (^GSPC) futures.

[happy]

more emerging/frontier markets ... ouch!

 

EIDO (Indonesia)

 

. . . falling apart

 

[happy]

Scandinavia’s Richest Economy Stumbles as Euro Area Rebounds

 

Norway, western Europe’s biggest oil and gas producer and home to a $760 billion wealth fund, is struggling to spur demand just as the rest of Europe surfaces from half a decade of economic pain.

 

 

 

The H&S pattern projects to ~ 0.1400 (= 2008 low)

[happy]

Some nice follow through in the metals:

 

Silver Wheaton

 

SLV

[drbubb]

nice charts, with luck we will get a nice leg up in the next week

[happy]

Euro currently at channel resistance ... and possible turning point (in the short-medium term)? From a longer term perspective, things would start looking decidedly more bearish if the 127.50 level were to be taken out.

 

Euro weekly:

 

Euro monthly:

[drbubb]

Those are excellent - it looks like the Euro may be peaking.

(of course, we cannot rule out a breakout)

 

A peaking Euro, would mean a rising USD

[happy]

The Dr. Bubb liquidity indicator / warning system may also be signalling an imminent turn ahead ... at least if the LQD:TLT ratio continues to lead the SPX

 

 

And on a related note, although the Dow has continued to power ahead in 2014, the divergence first noted in early 2013 remains in place / stretch further.

 

[drbubb]

"... if the LQD:TLT ratio continues to lead the SPX..."

 

Exactly right.

I am watch that indicator closely now.

It had a nice bounce recently, but it has given up those gains now - suggesting that a Stock Slide may be underway

 

bond can effect gold prices too

Gold Traders Should Keep An Eye On Bond Yields - Kitco News, May 16 2014 2:21PM

 

“This year's bond rally refuses to die,” said Alex Manzara, vice president at R.J. O’Brien & Associates, in the Eurodollar market. “I don't think I have ever seen as many people confounded by such a strong move.... My personal view is that the move to lower rates has a variety of factors including the slowdown in China/Asia, the continued deflationary quagmire in Europe, the fact that low rates favor capital over labor, thus holding down wages, etc.”

Analysts at Deutsche Bank said the drop in U.S. real yields “introduces a more supportive environment for the gold price since gold and silver returns (tend) to perform well in an environment where U.S. short- and long-term real yields are falling.”

One gold trader said he’s keeping an eye on the bond market and said it’s possible if bond yields stay put, it could give gold a boost. “It gives you a sense that something is afoot and making people nervous. They go to U.S. paper (bond market) as the market of last resort,” he said. “We’ll see if this Treasury rally will help gold break out on the upside.”

But that doesn’t mean he’s expecting it to happen, he said. For next week, he said he is still forecasting gold to stay in the current range between $1,280 and $1,305, saying that the $1,305 area is a “great place to trade from” on the bearish side.