THERE IS NO INFLATION according to the US Government studies. We suggest that you tell that to the health insurance carrier that just upped your monthly premium by 20%, or tell the grocer that you will not pay more than 2.5% higher prices than you paid last year! Don’t buy milk, eggs, cereal, orange juice, coffee, gas for your car, unless the prices are rolled back to the governments agreed upon inflation numbers. Hey and while you are there, tell the local municipality tax assessor that that the 20% increase does not agree with the government finding, so the municipal taxes must be adjusted downward!
Sadly, increases to the tune of 20% on health care premiums, real-estate taxes, utilities, food and the necessities of life are real, and not subject to roll-backs. For seniors living on a fixed income, this is awful. While their costs are escalating at a healthy rate, their returns on their savings are declining at an equally healthy rate. Pretty soon we will have senior welfare applicants, because retirement incomes can not meet everyday expenses. The strong Euro has been a very effective tool in fighting inflation in Europe while the weak US Dollar has been one of the causes of high US inflation as measured by the amount of buying power a family has at the store. Naturally, the US Government does not see much in the way of inflation.
We hear that Australia is a nice place to live. Most of its banks have no exposure to the sub-prime mess, there is plenty of room for expansion and their economy is not in recession. Actually, another benefit is that you don’t have to learn a foreign language; English is the language of the land.
The markets, as measured by the S&P 500 and the NASDAQ 100 seem to be rallying in the face of awful news. For many of the past days, we have seen bad news accompanied by a slight retreat which then leads to a rally. This market wants to rally, no question about that. We are an optimistic bunch with a media that is touting the bottom of the bear market, what else should we do but to buy and wait. There are hoards of cash sitting on the sidelines waiting to find a home. Still, the public isn’t as naive and is more cautiously complacent.
The past four trading days have logged in as higher highs and higher lows, this is positive. The question is can it last. Ask the media and the answer is that this is the beginning of the next Bull Run! We are more cautious and believe that this could be merely a rally in the context of a bear market. We have broken the short term downtrend line and do have some mechanical buy-signals on this market, however; we believe that better buying opportunities will come to those who wait. We would rather enter the party fashionably late, and be right than to enter the party as the first guest and be wrong.
Monday: Alcoa begins the earnings parade and at 3:00 we get a glimpse of consumer credit for February.
Tuesday: Pending home sales for February are released at 10:00 and the minutes of the March FOMC meeting are released at 2:00.
Wednesday: February wholesale inventories are released at 10:00, the Bank of Japan releases its interest rate decision….duh, ya think unchanged…., Fed Chairman Bernanke speaks, and Dallas Fed President Fisher speaks.
Thursday: February international trade is released at 8:30, retailers report sales for March, the European Central Bank releases its interest rate decision, the Bank of England releases its interest rate decision, and Fed Chairman Bernanke speaks. February: March import prices are released at 8:30 and April Michigan Sentiment is released at 10:00.
The US Dollar index remained below the downtrend line this past week. For the past 3-trading days, we have seen the market open higher only to close lower on the day. The upside failures were dramatic. All the indicators that we follow herein are issuing a uniform sell-signal. The 5-period moving average is at 72.507. The top of the Bollinger band is at 73.746 and the lower edge is seen at 71.504. The weekly chart shows a different picture than does the daily chart. On the weekly chart, the indicators are all pointing higher and the market looks as though it is trying to defend the 71.70 low. Naturally, should that level fail to support the market; we will open the door to the previous low of 71.205 and lower. The US Dollar index must stay above 72.152, which is the uptrend line. That line gets steeper as the week moves on and by Friday will be at 72.457. At the same time, we have a declining downtrend line which will be at 73.006 on Monday and by Friday will be at 72.721. If we remain narrowly traded, we will face a point of inflection by the Tuesday-Wednesday sessions of next week April 16-17.
The Euro is the mirror image of the US Dollar index and for the past three days has been in rally mode. The Friday session left a doji-like-candle on the chart. This speaks of a market in transition and a market that isn’t quite sure of its direction. Further, a doji candle does warn that we could see a change in direction of the market. All the indicators that we follow herein are issuing a buy-signal on the daily chart. The 5-period moving average is at 1563.74. The top of the Bollinger band is at 158.540 and the lower edge is seen at 152.271. On Thursday of this coming week, we will get the interest rate decision from the European Central Bank. No change is expected in their inflation fighting stance, however; it should be noted that Europe is facing an economic slow-down. Friday’s action in the Euro was very positive. The Euro traded above the down-channel trading up to the downtrend line of 157.210. That downtrend line will be at 157.07 for the Monday session. The weekly chart is less positive showing a market that is extremely overbought and exhausted. All the indicators that we follow are curling over to the downside. The monthly chart validates the findings of the weekly chart and looks as though this market will retreat.
98.80 is an important number for the Canadian Dollar! The stochastic indicator and our own indicator are curling to the upside on the daily chart but have not issued a buy-signal at this time. We would expect to see a buy-signal within a day or so. The RSI is issuing a buy-signal and the Thomas DeMark Expert indicator is issuing a sell-signal. The point and figure chart tells us that we must stay above 98.90 or risk a retreat to 96.80. We also see that should we close above 99.60 we will have a decent run to the upside. The 5-period moving average is at 99.67….sound like a number we just spoke about? The top of the Bollinger band is at 106.35 and the lower edge is seen at 81.83. The weekly chart has a bullish engulfing candle as a result of last week’s trading. The stochastic indicator, our own indicator and the RSI are all issuing a buy-signal. The Thomas DeMark Expert indicator is issuing a sell-signal near an oversold level. The monthly chart shows a very steady retreat in the Canadian Dollar with good support seen at 96.68. We are below the Ichimuko clouds on the daily chart but above the clouds on the weekly and monthly charts.
The British Pound Sterling has an interesting chart. The stochastic indicator continues to point higher as does the Thomas DeMark Expert indicator, however; our own indicator is curling over to the downside and the RSI is curling over to the downside. The market broke above the Ichimuko clouds and then fell back into the fog of the clouds. The 5-period moving average is at 197.56. The top of the Bollinger band is at 201.47 and the lower edge is seen at 195.89. As to the weekly chart, we are in the clouds and below the downtrend line. The indicators are mixed for this time frame. It will be interest to watch this market unfold. Should this market close above 200.69, we believe that the old high of 210.95 will be in play. Certainly, we have many stops before we attain that level but a close above 200.69 opens the door to higher levels. The monthly chart shows all indicators that we follow at oversold levels. The stochastic indicator our own indicator and the RSI are all issuing a mild buy-signal. The chart is fairly flat looking and seems to becoming narrower.
We have now had two mechanical buy-signals on the S&P 500. The first signal was to buy the S&P 500 at 1290.60 on March 20, 2008 the second occurred this past week on April 1, 2008. We have a doji-like candle on the chart as a result of the Friday session. We did expand to the upside and made a higher low than was seen on the previous day. The stochastic indicator is overbought and has just issued a sell-signal. The RSI is flat near overbought levels and our own indicator is issuing a sell-signal. The Thomas DeMark Expert indicator is issuing a continued buy-signal at overbought levels. The 5-period moving average is at 1362.16. The top of the Bollinger band is at 1387.08 and the lower edge is seen at 1267.87. The 50 day moving average is at 1342.15, a level that is below the market. We are in the Ichimuko clouds on the daily chart and pierced the Ichimuko 3 line (the 52 day moving average) of 1383.15. All the indicators that we follow are issuing a buy-signal on the weekly chart. There is a horizontal line at 1400, which should offer resistance to any upside progress. As to the clouds on the weekly chart, we are below the clouds, however; on the monthly chart, we are above the clouds.
The NASDAQ 100 has a more positive chart than does the S&P 500 from a longer-term prospective. Why? Well because it has been basing for a longer time and is breaking out to the upside of a very long base. Having said that, we must caution that we are not out of the woods yet and that this formation, although positive looking could fool us and break lower should 1674, a double low, fail to support the market. The Friday session left a doji-like candle on the chart. Yes, we did wee an upside probe to the top of the Bollinger band and a market that was supported at the 5 day moving average number, both of these events were positive for the market. The RSI is hovering going sideways near the overbought level. The stochastic indicator and our own indicator are both grossly overbought and are both issuing a sell-signal. The Thomas DeMark Expert indicator is overbought and continues to issue a buy-signal. We are in the Ichimuko clouds on the daily chart, below the clouds on the weekly chart and above the clouds on the monthly chart. The 5-period moving average is at 1849.50. The top of the Bollinger band is at 1893.84 and the lower edge is seen at 1664.30. The weekly chart shows that all the indicators that we follow continue to issue a uniform buy-signal. This past week’s rally in the NASDAQ 100 is one of the best rallies seen in a very long time. The monthly chart is also moderately positive although, we remain below the downtrend line, for that time-frame.
The Russell 2000 had a mild retreat in the Friday session after enjoying a 4-day rally. The stochastic indicator and our own indicator are both issuing a sell-signal at grossly overbought levels. The Thomas DeMark Expert indicator is issuing a continued buy-signal at overbought levels and the RSI is going nowhere near overbought levels. The Russell 2000 looks as though it is tired and may want to retreat a bit at this point. The 5-period moving average is at 708.22. The top of the Bollinger band is at 725.85 and the lower edge is seen at 642.58. We are in the Ichimuko clouds. We have re-entered the congestion area which could take us as high as 733.50. Remember the other end of the range is at 680.50, which if violated will lead to a retest of the low of 640.80. The 50 day moving average is at 695.12 which is a point where some buying may appear. All the indicators on the weekly chart are positive and continue to issue a buy-signal. We remain below the clouds on the weekly chart yet above the clouds on the monthly chart. All the indicators on the monthly chart are issuing a buy-signal. On a short-term basis, we expect to see the market retreat from these levels, on a longer term basis, we thing that the market will try to edge higher.
The Continuous Commodity index edged higher in the Friday session, rallying 1.06% on the day, or 5.50 points. This index has been up on four of the past five days and traded to the lip of the gap on the chart at 527.65 to 530.65. All the indicators that we follow herein are uniformly issuing a solid buy-signal. However, on the DeMark, we see a sell-set-up at 523.10. We are in the Ichimuko clouds, on the daily chart, above the clouds on both the weekly and the monthly charts. We have signs of exhaustion on the weekly chart. The indicators are, for the most part, mixed and not giving us any guidance. We feel that the fate of this index is, at this time, linked to the US Dollar. We would become somewhat bearish should this market break below 505.50.
May cocoa rallied in the Friday session but not enough to remove the downtrend line. Tall the indicators that we follow herein are issuing a buy-signal from oversold levels. The 5-period moving average is at 22.69. The top of the Bollinger band is at 29.72 and the lower edge is seen at 20.50. The buy-set-up point on the daily chart is at 22.96. We remain below the Ichimuko clouds on the daily chart, but above the Ichimuko clouds on both the weekly and monthly charts. We seem to be trying to make a bottom and so long as we do not close below 22.17, we will be setting up for a nice rally. However, should we remove that level; we will revisit the 21.08 level. The weekly chart shows a horrific huge red candle formed in the week ending on March 21st. We continue to have a bearish looking chart with lower highs and lower lows. The monthly chart looks equally as bearish. If long, keep your stops tight.
May sugar continues to try to close above the downtrend line but with little success. The stochastic indicator, our own indicator and the RSI are all issuing a sell-signal at oversold levels. The Thomas DeMark Expert indicator is issuing a buy-signal. We would use 11.25 as a do or die number. Should we close below that level, we will open the door to 10.93 and lower levels. Naturally, we are below the Ichimuko clouds on the daily chart, above the clouds on the weekly chart and below the clouds on the monthly chart. The market needs to close above 12.45 to turn this chart around. It would be seen as constructive to see the market regain the 11.67 line.
May coffee looks like a chart waiting for something to happen. This market has been going sideways for several weeks now and seems to be trapped in a range of 125.85 to 135.35. Until and unless we breakout of that range we are not going to have much interest in this market. The indicators are reflecting this flattish behavior with only the Thomas DeMark Expert indicator looking very bullish. Although the stochastic, the RSI and our own indicators are issuing a buy-signal that signal is muted. The 5-period moving average is at 129.71. The top of the Bollinger band is at 158.31 and the lower edge is seen at 117.74. The weekly chart is oversold with only the stochastic indicator giving a buy-signal. The market seems exhausted but unable to rally.
May Frozen Concentrated Orange Juice is forming a rounded bottom. All the indicators that we follow herein are issuing a buy-signal. We have, by virtue of going sideways, broken the downtrend line, well slightly. We remain below the Ichimuko clouds for the daily and weekly chart, only the monthly chart remains above the clouds. The 5-period moving average is at 111.54. The top of the Bollinger band is at 126.89 and the lower edge is seen at 104.81. The good news on Juice on the weekly chart is that we did not make a lower low; then again we didn’t make a higher high either. The Weekly chart looks like a very well organized retreat in FCOJ. The indicators for that time-frame are positive.
May cotton is another example of a flat looking chart. We did see a doji candle as a result of the Friday session, with an expansion of the up and down sides resolving in a very slightly positive session. The indicators are all on the oversold side of neutral and all looking very flat, albeit with a slightly positive tilt. The 5-period moving average is at 70.18. The top of the Bollinger band is at 82.91 and the lower edge is seen at 66.27. We are below the Ichimuko clouds on the daily chart, but above the clouds on both the weekly and the monthly chart. All the indicators that we follow are issuing a sell-signal on the weekly and the monthly charts.
Crude oil is making its way back to the upside of the chart. We are trading above the Ichimuko clouds on the daily chart and the indicators are issuing a continued buy-signal. The 5-period moving average is at 103.49. The top of the Bollinger band is at 111.86 and the lower edge is seen at 99.37. Both the weekly and the monthly charts are positive. Below 97.85 we have a liability to 87.40, above 108.30 the old highs and higher. There it is plain and simple. Frankly this market looks as though it is going to work its way higher.
Gold is in the Ichimuko clouds on the daily chart. We did see a close slightly above the downtrend line and above the uptrend line. The indicators are mildly positive. The 5-period moving average is at 901.54. The top of the Bollinger band is at 1022.12 and the lower edge is seen at 873.73. The indicators on the weekly chart are pointing lower. There should be good support at 849.50 or a bit higher. We are above the Ichimuko clouds on the weekly chart. If we were to put in a sell-stop, it would be at 847.00. When looking at the point and figure chart, we remain in an uptrend. The market feels heavy and may need to trade sideways or a little lower before the next upside assault.