NO LETTER NEXT WEEK. WE WILL BE AT THE AAPTA CONFERENCE IN SAN FRANCISCO.
Much has been said and reported about the “double bottom” being formed in the averages. We must pronounce, with all due respect, that THIS IS NOT A DOUBLE BOTTOM, and even if it were going to be one, the data isn’t there to support that finding. Over and beyond our annoyance with the proclamation–that most technical analysts see this as a double bottom, we remind you that we hold that designation and do not see a double bottom in the market. The CMT designation isn’t a group thing, but rather a single achievement of passing three rather challenging exams. The designation does not give you experience, but rather gives you the tools to use to build experience.
We continue to complain that many of the young portfolio managers, hedge fund managers and market jockeys have never seen a full blown recession nor have they seen a real crash in the market. Naturally, they look for the bottom because bottoms have been found after relatively little pain in a retreat. This is not the brief bottom seen at the end of the dot. nothing peak. This is a real bear market with fantastic bull rallies that trap the investors and slam them to the floor of despair.
The Fed can reduce interest rates to zero and that will not stave off the problems ahead. We are in a real mess created by the efforts to avoid a mess during the Greenspan era at the Fed. The housing bubble was a result of many things, one of which was easy money from the Fed. The lack of regulation and the absolute greed of the market caused this condition and now, it is time to pay for the excesses of this folly. Further, we are now in a period of real inflation. People are struck with higher real-estate taxes, living expenses and health care expenses. Not only have we seen in increase in the cost of food, utilities and health care but we are facing increasing costs for health insurance. Since the beginning of the year, our health insurance costs have increased by 20%! Today, health insurance cost is as high, and sometimes higher than the rent for an apartment. Where does this leave us? Well, obviously, the public will cut out that expense and risk being uninsured. This will have major implications on those who have the misfortune to become ill without insurance to cover the costs. We really don’t like being so glum, but our question is how will the average family cope with these cost increases? Will these misfortunes swell the welfare system? Will the government go broke? Yes, we know they can print more money.
A strange thing happened to the VIX with the most recent downturn in the market, it hardly moved. What happened to the unbridled fear that emerges when the market drops? What happened to the put buyers….where did they go? These are really good questions to ask when looking at the market. It seems as though many of the players are standing on the sidelines waiting to see which way the market breaks. This lack of fear keeps the VIX rather tame, given the moves in the markets.
Keep an eye on commodities because any wild decline in the equity markets could and probably will result in a retreat in that asset class. We need to see a major retreat in equities for more than four days. This will set off margin calls, which will be answered by selling the asset class that is available. Lately, we have seen commodities looked at as a source of quick margin funding.
Monday: March retail sales are released at 8:30, February business inventories are released at 10:00 and the Bank of Japan publishes its minutes from its March meeting.
Tuesday: March PPI is released at 8:30, Intel releases its earning and it is IRS day.
Wednesday: housing starts and building permits for March are released at 8:30, CPI for March is released, March Industrial production and capacity utilization is released at 9:15, and the Beige Book is released at 2:00. (IBM, JP Morgan and eBay release earnings)
Thursday: leading indicator index for March is released at 10:00, and the Philadelphia Fed business outlook survey is released at 10:00.
Friday: Richmond Fed President Lacker speaks and AAPTA holds a conference in San Francisco!
The US Dollar index declined in the Friday session ending the week lower, but not at the lows of the week which were seen in the Thursday session. The short-term downtrend line is at 72.275 for the Monday session. The stochastic indicator, the RSI and our own indicator all continue to point lower, with plenty of room to the downside. The Thomas DeMark Expert indicator is oversold but not bending or curling to the upside. The 5-period moving average is at 72.346. The top of the Bollinger band is at 73.247 and the lower edge is seen at 71.599. Wednesday’s plunge and Thursday’s rally played with the uptrend line but then, failed to hold it and the market closed below that line. The weekly chart shows a doji-candle as a result of last week’s trading. Doji candles indicate that the market is in transition and will likely change direction, we are not sure of that because we continue to see lower lows and lower highs which define a market in retreat. The indicators on the weekly chart are somewhat flattish. The stochastic indicator is issuing a sell-signal at oversold levels, our own indicator is going sideways but not positive and the RSI is just going sideways along the oversold line. The Thomas DeMark Expert indicator is issuing a buy-signal coming from oversold levels. When looking at the weekly chart, we are impressed that the momentum on the downside seems to be slowing and this is yielding a slightly narrower trading range. We have noticed that for the past several weeks the momentum of the US Dollar index has slowed. It almost looks as though there is nothing but shorts left in the market. Certainly the news of the US economy is not good and many of the players in the global market, that have been funding our spending sprees here in the USA, are becoming annoyed with our money-pumping policies reducing the value of their US dollars, yet, aside from not buying much at the auctions, they have stood by and used their hoards of US dollars to buy into some of the USA’s best industries and companies. Hard assets for weak US dollars, not a bad trade!
The Euro had an inside day in the Friday session and closed above the open leaving a green candle on the chart. The stochastic indicator, the RSI and our own indicator all continue to issue a buy-signal although at or near overbought levels. The Thomas DeMark Expert indicator is issuing a sell-signal at an overbought level. We had a 14-count on Thursday. The 5-period moving average is 157.128. The top of Bollinger band is at 158.711 and the lower edge is seen at 153.966. The 20 period moving average is at 156.339. We saw the Euro close in the Market Profile value area. The weekly chart looks overbought but bullish. The stochastic indicator continues to issue a buy-signal however, the RSI and our own indicator are going flat at overbought levels and the Thomas DeMark Expert indicator is issuing a sell-signal. It seems as though the Euro is heavy, having trouble making progress to this upside. The monthly chart is overbought as measured by the RSI, stochastic and our own indicator. Only the Thomas DeMark Expert indicator is issuing a sell-signal the others, are just going sideways at overbought levels.
The Canadian Dollar retreated in the Friday session opening the door to the downside level at 96.68 – 96.40. All the indicators that we follow herein are uniformly issuing a sell-signal. The downtrend line is at 98.84 for the Monday session. We closed the week below the Ichimuko clouds and in the Market Profile value area. The 5-period moving average is at 98.21. The top of the Bollinger band is at 100.59 and the lower edge is seen at 96.43. All the indicators that we follow herein are issuing a sell-signal on the weekly chart. We are getting fairly oversold for this time-frame. The weekly chart finds the Canadian Dollar above the Ichimuko clouds. To become bullish, on the weekly chart, we need to trade and close above the downtrend line of 98.42 by this coming Friday. When you look at the weekly chart it becomes fairly clear that the lows already mentioned are very important and need to hold. Should the lows fail to hold the market we could have a swift move to the 95 area.
The British Pound Sterling closed just above the Ichimuko clouds and seems to be trying to defend the recent low of 195.50. We are in a downtrend however, the trading range is contracting. Should this market remain above 195.50 without violating that level, we could see a rally to the downtrend line at 198.21. The stochastic indicator and our own indicator are both issuing a buy-signal. The RSI is flat and the Thomas DeMark Expert indicator is issuing a sell-signal at oversold levels. The 5-period moving average is at 196.498. The top of the Bollinger band is at 200.398 and the lower edge is seen at 195.179. The weekly chart shows a downtrend with lower highs and lower lows. The indicators are all issuing a sell-signal for the weekly time-frame. The weekly chart shows us that there is a liability to 193.30. The monthly chart supports the findings of the weekly chart.
The S&P 500 had a nasty sell-off in the Friday session taking it beneath the Ichimuko clouds and below the 20 period moving average. All the indicators that we follow continue to issue a sell-signal, only the Thomas DeMark Expert indicator is at oversold, the others, are near or slightly below neutral. Thus, we have plenty of room to the downside. The downtrend line for the Monday session is at 1363.67. The 5-period moving average is at 1360.38. The top of the Bollinger band is at 1397.744 and the lower edge is seen at 1285.295. It is important for the market to stay above 1334.29. Should that level fail, we will open the door to1315.80 and 1309.50. We are below the Market Profile value area. We did close in the value area for the weekly time-frame, further; this past week’s sell-off did not make a new low and did make a marginal new high. Unfortunately, the indicators for the weekly time-frame are curling over and will issue a sell-signal this week unless, the market rebounds (the RSI has already issued a sell-signal). All the indicators that we follow herein are issuing a buy-signal for the monthly chart. Watch out for wild swings during this coming week, not only is it earnings season, but this is an options expiration week.
The nasty Friday sell-off bled into the NASDAQ 100 with a retreat of 52.50 points on the day. All the indicators that we follow herein are issuing a sell-signal, only the Thomas DeMark Expert indicator is at an oversold level the others have plenty of room to the downside. We are in the Ichimuko clouds on the daily chart. The 5-period moving average is at 1844.55. The top of the Bollinger band is at 1917.456 and the lower edge is seen at 1693.716. The weekly chart looks much better. Here we see a market in an uptrend. The indicators for the weekly chart are curling over to the downside, all except the Thomas DeMark Expert indicator which, is issuing a continued buy-signal at overbought levels. The Market Profile chart tells us that should we see a rally to 1880 area, that the rally will likely take us up to 1936 and from there up to 2048.
No surprise, the Russell 2000 looks much like the other indices. The market is rolling over to the downside. The Russell 2000 needs to stay above 679.90 or risk a retest of lower levels and then probably the March low of 640.10. The downtrend line for the Monday session is at 709.61. The 5-period moving average is at 704.30. The top of the Bollinger band is at 730.42 and the lower edge is seen at 658.06. We closed below the Ichimuko clouds and below the Market Profile value level. We would not be surprised to see a retest of 679.9 this week. The weekly chart shows a series of higher lows and higher highs ending this past week with a matched high to the previous week. The stochastic indicator and our own indicator will issuing a sell-signal, the RSI has already issued a sell-signal however; the Thomas DeMark Expert indicator is issuing a buy-signal all signals are for the weekly time-frame. The monthly chart is giving us mixed signals. The Russell 2000 has held up better than its big brothers and seems to want to rally when the buyers appear.
The Continuous Commodity Index looks as though it is rolling over to the downside. We have signs of exhaustion on the daily chart. All the indicators that we follow herein are issuing a sell-signal. The 5-period moving average is at 537.136. The top of the Bollinger band is at 554.963 and the lower edge is seen at 504.956. The daily chart is in the Ichimuko clouds and inside the value area of Market Profile. We continue above the uptrend line which is at 537.10 for the Monday session. The weekly chart is more positive. All the indicators that we follow herein are issuing a buy-signal for the weekly time-frame. The CCI is above the clouds for the weekly time-frame and looks as though it want to go higher, on a weekly basis. This is confusing in that the daily chart looks as though the market has rolled over to the downside. If the CCI can remove 553.10, we will become positive on this market and expect it to trade to 561.50. On the downside, we should see support at 530.78. Should that fail to support the market, we will open the door to 507.82.
July sugar left small candle on the chart as a result of the Friday session. We closed below the Ichimuko clouds but above the Market Profile value area. All the indicators that we follow herein are issuing a fresh sell-signal for the daily time-frame. The 5-period moving average is at 12.802. The top of the Bollinger band is at 13.3588 and the lower edge is seen at 11.6252. The uptrend line for the Monday session is at 12.65. The weekly chart paints a different picture. This chart is very positive and looks as though the price will go higher. The indicators all are issuing a buy-signal for the weekly chart. The weekly chart is above the Ichimuko clouds, which is an additional positive. The monthly chart does not look good so, go figure. We have the daily negative, the weekly positive and the monthly negative.
July coco enjoyed a rally for four of the five trading days last week ending the Friday session near the highs for the week. Getting there has gotten cocoa overbought. The stochastic indicator, the RSI and our own indicator are all overbought but continue to issue a buy-signal. The Thomas DeMark Expert indicator is curling over and is issuing a sell-signal from overbought levels. The 5-period moving average is at 24.262. The top of the Bollinger band is at 27.68 and the lower edge is seen at 21.089. The weekly chart has a very large green candle as a result of this past week’s rally. The indicators are all positive on the weekly chart. So long as we do not trade below 22.17, the market will go higher. We have recovered about half the loss seen in the early March sell-off.
Although July coffee rallied for three of the five trading days this past week, it left another red candle on the chart in the Friday session. We remain in the Market Profile value area and below the Ichimuko clouds. All the indicators that we follow herein are issuing a solid sell-signal. The 5-period moving average is at 135.68. The top of the Bollinger band is at 145.64 and the lower edge is seen at 125.426. The weekly chart shows this past week’s probe and failure to the upside. The weekly chart finds coffee above the Ichimuko clouds. It is important for 128.40 and 128.75 to hold this market. Should those levels fail to support this market, we will revisit 122.70 121.35 and 118.70. Perhaps as we move into the Brazilian seasonal changes talk of the illusive “freeze” will reappear and support this market. We have been waiting for years for the “freeze” to reappear.
The Frozen Concentrated Orange Juice chart has been in a blue funk for quite a long time. We are naturally below the Ichimuko clouds. Friday’s rally was so feeble that we barely closed at the Thursday closing level. The indicators are all pointing lower although, both the stochastic indicator and our own indicator are curling to the upside but seem to be at least two days away from a buy-signal. The 5-period moving average is at 116.97. The top of the Bollinger band is at 122.1703 and the lower edge is seen at 111.004. The downtrend line on the weekly chart is at 122.82, a level which needs to be removed to return the bulls to the market. The stochastic indicator and the RSI are both oversold on the weekly chart but have not issued anything of value. The Thomas DeMark Expert indicator is at neutral and going sideways and our own indicator is much the same. We are below the Ichimuko clouds on the weekly chart and below the value area as described by Market Profile.
We have a 13-count in cotton on the daily chart. All the indicators that we follow herein are issuing a sell-signal. The 5-period moving average is at 76.98. The top of he Bollinger band is at 80.26 and the lower edge is seen at 71.83. The market continues above the uptrend line which is at 77.06. The weekly chart looks more positive than does the daily chart. Here, we see a very large green candle. The stochastic indicator, our own indicator and the RSI are all issuing a buy-signal on the weekly time frame. We are above the Ichimuko clouds for the weekly time-frame but below the clouds on a daily and the monthly charts.
Crude oil is overbought but continues to move higher. The indicators continue to issue a buy-signal here at overbought levels. The 5-period moving average is at 108.51. The top of the Bollinger band is at 110.72 and the lower edge is seen at 97.78. All time frames for crude oil are overbought but all continue to issue a buy-signal. Don’t fight the crowd; don’t fight the trend and stop looking for the top. It will find you when it is ready!
June gold is rolling over to the downside. We are in the Ichimuko clouds on the daily chart. The RSI is issuing a sell-signal however, the stochastic indicator although overbought, continues to issue a buy-signal. We are at the upper edge of the value area. The 5-period moving average is 928.22. The top of the Bollinger band is at 1004.4 and the lower edge is seen at 873.08. The weekly chart is positive. The indicator for this time-frame is issuing a buy-signal. We are above the clouds. The monthly chart looks as though we are rolling over to the downside. Watch the US Dollar index for clues regarding gold.