Archive for September, 2012

Sunday, September 30th, 2012

There will be no letter until October 28, 2012

Here in the USA we enjoy the freedom of speech which is protected by the first amendment of the US Constitution. This privilege is something that is not entirely understood by much of the world. Freedom of speech allows us to say and believe whatever we care to so long as we do not physically injure, slander or liable another. Our citizens can burn our flag, object to rules, use offensive language, preach their own religion, petition for something they want, etc. This freedom can be seen in almost every part of our lives.

Much of the globe does not enjoy this freedom and lives in restricted environments where voicing opposition would be a death warrant or at the very least a lashing. We have no such limitations on our freedom. We are allowed to produce and say whatever it is that we like. Even proclaimed artwork of donkey dung atop the American flag would be allowed, although we agree in really poor taste and with limited usage, but it tells you about our freedom. This freedom comes without responsibility, and that is too bad. Then again, it is a freedom, which our forefathers fought for. We can reference you to a well-known controversial art-work exhibited at the Brooklyn Museum of Art. The art featured the Virgin Mary covered with elephant dung. Oh and the Virgin Mary was not covered up. Was this in good taste, well some would okay it but we felt it was a bit out there. That said, it was permitted to hang in the museum. There is a controversial film about the Muslim Prophet Mohammad which was allegedly produced here in the USA and posted on “YouTube;” again this is our freedom. We can do this. Is it something we would approve of, certainly not, however; it is one of our freedoms. There are parts of the world where people just do not understand the extent of this freedom.

We work on Wall Street and walk past the “Occupy Wall Street” vagabonds on a daily basis. We are horrified by the fact that thousands of tourists watch and see this troupe of mostly young unkempt people sleeping in front of Trinity Church and on subway platforms marching and parading around Wall Street. They are misdirected and should, in fact, march around the White House and Halls of Congress. Instead they march on Broadway, Broad Street and Wall Street where hard-working support staff see and hear them. What good are they doing anyway; we are so used to their presence that we just step over them and proceed to our destination. Too bad tourists have to see this. This is part of our Freedom of Speech. It is entirely legal and this troupe of idiots may continue to crowd the sidewalk, set up paper tents in parks and act like the rebels that they are. Somebody is funding them; they couldn’t afford to do this on their own.

As the Presidential elections near, we become more and more upset with both parties. It seems that nobody understands the business cycle and what freedom means. We do not redistribute the wealth that is communism; we do care about all the people not just 53% of the population. We have to take responsibility for having elected these clowns into office. We are responsible for having hired them to represent us when they represent their own causes and not the causes of the people who elected them. We should throw the bums out. Neither party is doing any good.

It should be a law that no elected group can award themselves a salary increase. After all, we the people have hired them and if an increase in compensation is requested, we should have a vote on that. Actually, we believe that they should all be one-termers so that that they might get some work done rather than concentrating on the next election.

At the moment our currency is the reserve currency and indeed is the best of the bad currencies available. We will remain the reserve currency so long as we stay on top of the poop pile. That said, this is not a great position but better than the others. We used to be a proud country that jealously guarded our freedoms. We had trials about socialism and communism. We were actively against that. Now, we hear elected officials speak about redistribution of wealth. We would agree to some thoughts, actually we should not give social security benefits to those individuals with high net worth or high income. They certainly don’t need it and could easily afford their own insurance.

The US Dollar Index spent the week climbing back to the down trend line it had cascaded away from, closing the Friday session at 80.025; managing a close above the previous day’s high. This index is truly manic, however; manic markets make the most interesting of patients.

The daily candlestick chart shows a down trend line in place since the end of July that has done a fair job of containing the index. After falling sharply away from this line September 5th – 14th, the market rallied back to this point. The Upper Bollinger Band is at 81.447, the lower band is at 78.44, and the bands are currently coming together. We are above the 20 period simple moving average (which is at 79.94), and the 5 period exponential moving average (which is currently at 79.76). The RSI has broken above the down trend line and is moving higher, and we are also receiving buy signals on both the Stochastic and our own indicator. On the downside there is support at the 78.82 level and 78.10 below that. On the upside, should the index break above the down trend line, the next stops would be between the 80.29 and 80.35 region (though the weekly chart shows support a little higher than that).

The 60 minute .05 x 3 chart shows several internal count trend lines having formed. There is one activated upside target of 80.95 and one new unactivated upside target of 81.1. The 79.9 level seems to have been a sticking point for the index but briefly on September 21st, and then more forcefully on September 26th, the index broke through. Markets with counter trend internal trend lines and upside targets typically mean a move higher is coming. In the near term, this chart shows a new double top break might bring this market to the 80.4 level

The daily .5% x 3 point and figure chart shows we are still currently in an uptrend though internal trend lines are forming in both directions. No new targets have formed as we still have one upside target of 85.96 and one downside target which we largely disregard of 66.65.

The weekly candlestick chart shows a market edging its way closer to the 80.34 resistance line above. The 9 Period RSI and stochastic indicators are issuing buy signals and our own indicator is on the verge of issuing a buy signal.

This is a very volatile market. Were the US Dollar Index a human, we would likely recommend some Paxil and no over stimulation. In the short term we see the market rallying up a bit more and poking through the down trend line, perhaps making its way to 80.35, 80.40. At this point it would not surprise us to see the rollercoaster continue and the market to make its way back down.

The S&P 500 remains in the upward sloping channel lines. The upper channel line is at 1483.20 and the lower channel line is at 1407.43. The 5-period exponential moving average is at 1439.61. The top of the Bollinger Band is at 1478.93 and the lower edge is seen at 1401.56. We look as though we have an upside-down bull flag, which, because it is upside down is really bearish. Until or unless we move outside of these trendlines, we will remain bullishly inclined favoring high dividend stocks with a long history of consistently paying a dividend. These stocks are providing a spring board for the market. Insomuch as this a period of relative risk-on trades the money is flowing and chasing yield. The stochastic indicator is giving us mixed signals. The RSI is pointing lower and just below the neutral zone. Our own indicator is giving us a sell-signal and the Thomas DeMark Expert indicator is curling to the upside at oversold levels. We are above the Ichimoku Clouds for all the time-frames under investigation. We can’t get very excited about this market and tend to believe that we will lumber on higher. As we enter October, remember that Halloween marks the close of the 2012 books for mutual funds. Therefore if there are changes to be made prior to the end of the year, they will be made before the end of the month. The market profile monthly chart shows us that there is an old comfort level from January 2007 at 1470. We would like to remind you that the high for January of 2007 was 1575. We would expect to see the market melt to the upside if we can push our way above 1470.

The NASDAQ 100 Friday took back about half of the upside seen in the Thursday session. We are above the Ichimoku Clouds for all time-frames. The upward trending channel lines are 2948.89 and 2780.57. There is a horizontal line at 2744.01 which market a level which would cause most bulls great angst. The 5-period exponential moving average is at 2807.33. The top of the Bollinger Band is at 2884.92 and the lower edge is seen at 2748.87. The stochastic indicator, our own indicator and the RSI are all pointing lower. The market profile chart tells us that above 2870, there is little resistance to worry about and that we will likely move to the upside. The point and figure chart has absolutely no downside targets and looks very positive for this index. The 60 minute chart does have some downside targets and some downtrend lines that would apply some pressure to any advance. This index looks as though it could feel some more pain before resuming any move to the upside.

The Russell 2000 retreated in the Friday session. The horizontal support line is at 828.15 and the downtrend line is at 847.24. For the shorts to worry the market needs to close above the 847 level. On the other hand for the longs to worry the market needs to remove the 828.15 level. At the moment, we are in-between these two levels. We are above the Ichimoku clouds for both the daily and the weekly time-frames. The 5-period exponential moving average is at 839.35. The top of the Bollinger Band is at 871.92 and the lower edge is seen at 814.09. The stochastic indicator, our own indicator and the RSI are all pointing lower. The Thomas DeMark Expert indicator is going sideways near oversold levels. This index generally is the source of end of year tax-selling. As mutual funds arrange their investments for the October 31st end of year closure, we are sure that this index will feel some downside pressure. There is a very short-term uptrend line at 831.76. 827.90 is a level that we need to stay above or face a steep downdraft. The point and figure chart is very bullish. The 60 minute point and figure chart is a bit more realistic.

Crude oil does not look very bullish on the daily candlestick chart. We are inside the Ichimoku Clouds for the daily time-frame, below the clouds for the weekly time-frame and above the clouds for the monthly time-frame. The monthly chart looks as though we are coiling and that is perhaps the nicest thing we can say about crude oil. Although the indicators on the daily chart are somewhat positive and closer to oversold than neutral, we are not convinced that they will remain in that condition. This market looks heavy and will likely retreat or back and fill. The 5-period exponential moving average is at 91.92. The top of the Bollinger Band is at 99.81 and the lower edge is seen at 89.52. The market looks as though it could easily test the 86.95 level. The point and figure chart shows that we are forming a pennant or coil. We have both uptrend lines and downtrend lines. This will resolve, when we are not sure, but resolve it will.

Gold retreated in the Friday session. The market seems to be digesting its recent gains. The weekly chart is a rounding upward tilting formation. We are above the Ichimoku Clouds for all time-frames. The 5-period exponential moving average is at 1767.79. The top of the Bollinger Band is at 1803.89 and the lower edge is seen at 1687.39. The stochastic indicator, our own indicator and the RSI are pointing lower. It is likely that we will back and fill a bit before another rally is attempted. The market profile chart tells us that above 1785.60 we will melt to the upside. There is little in the way of overhead supply and any shorts left in this market will clearly get very nervous at that level. The point and figure chart looks positive. Should gold retreat, we would suggest that a long position should be taken.