Archive for October, 2012

Sunday, October 28th, 2012

The Halloween/Sandy/election/unemployment special! Okay, that is it! All the information needed for this week! Just joking of course. We, here in the northeast, have been blessed with very little stress regarding hurricanes. We had Irene last year but this year we will be visited by Sandy a full strength hurricane that will make landfall head on to the heart of the northeast. From Washington D.C. to Boston the population will be at risk. For those not understanding the phrase “at risk” here is lesson one: you are in harm’s way. There is a greater chance than normal that you will incur an injury as to possession because of this elevated risk. As to the election which will take place in about a week, that is yet another hurricane. Before the election takes place, we have yet another jobs report to sift through. We do not expect to see much change in that report. Halloween was mentioned but it is more fun that fury….or is it this year. Don’t want to be stuck with all that Halloween candy. Heard of some minor scuffles among shoppers at Wal-Mart this morning but didn’t see any problems at Home Depot.

As to our financial hurricane, we see some small divergences in the indicators and the actions of the S&P 500 index. While the market continues to retreat making lower lows and lower highs, the indicators such as our own indicator, the stochastic indicator and the Thomas DeMark Expert indicator are issuing a buy. This indicates that we should pay attention and that we likely will have a bounce in the market. Interestingly, the S&P 500 traded below the 200 day moving average but managed to close above it. Still the market is below the 5-day exponential moving average and has crawled back inside the lower Bollinger Band.

As to the “Jobs Report” that is expected on Friday morning at 8:30, it is more creative writing and really seems to have very little value. Jobs are still hard to find but with the bean counter fooling around with their description of full time employment, one must cast a skeptical eye on the report. With Christmas approaching we can expect to see some new hires on the lower end of income earners.

The US Dollar index left a doji like candlestick on the chart as a result of the Friday session. We did see a poke to the upside challenging the levels seen on September 10th and 11th. As soon as the high was seen, at about 6am, the market took profits and printed the low for the session at about 10am. From there, the market essentially went nowhere. We did manage to close above the 5-period exponential moving average of 80.001. We tweaked the Ichimoku Cloud but remain below it on the daily chart. We are above the Ichimoku Clouds for the weekly time-frame but are below the clouds for the monthly time-frame. The top of the Bollinger Band is at 84.391 and the lower edge is seen at 78.33. Both the Thomas DeMark Expert indicator and the stochastic indicator are in overbought territory. The DeMark indicator has issued a sell while the stochastic will issue a sell within a session or two. Our own indicator is curling over to the downside but has not issued a sell-signal. The RSI is flat on the positive side of neutral. If the market can close above 80.41 for two days, I believe that we will go higher with a projection to about 81.135 or so. Both the daily and the 60 minute point and figure charts show unfilled upside and unfilled downside projections. This market really looks comfortable where it is. This is seen on the Market Profile daily chart of the US Dollar index.

The S&P 500 dropped out of the up trending channel and is now in a downward trending channel. This is also the case for the weekly chart but not for the monthly chart which remains positive…for now. The upper channel line is 1456 and the lower line is at 1394.62. The 5-period exponential moving average is at 1412.90. The upper edge of the Bollinger Band is at 1467.38 and the lower level is at 1399.71. We are inside the Ichimoku Clouds for the daily time-frame and above the clouds for both the weekly and the monthly time-frames. The stochastic indicator, our own indicator and the Thomas DeMark Expert indicator are all pointing higher. Only the stochastic indicator and the Thomas DeMark Expert indicator are oversold. Our own indicator is on the negative side of neutral but not oversold. The RSI is at 35.47, near oversold but not oversold yet. It is basically going nowhere and has been flattish for about a week. The Market Profile chart shows that we are in the comfort area where the bulge of trading is found. Actually before we went to Asia, we drew horizontal lines and the market has remained within those lines….amazing. The point and figure chart has unfulfilled upside and downside targets. The market has a bullish tilt to if and there are no downside trendlines to worry about. As to investment concerns, although earnings have not in general surprised to the upside and are less than would have been desired with projections of caution for the near future. It seems that so long as money markets and bonds yield these miniscule returns that money will flow into dividend paying old line issues. Because stocks appear to bear more risk than government bonds, investors need to take care in choosing the correct vehicle to invest in. Companies that have a long record of paying dividends and increasing dividends would be on the “A” list. Now is a good time to adjust your portfolio as we close into the end of the year. Send your doggy stocks to the pound and enjoy the tax loss you will receive from that portfolio adjustment. Start now before the rush and because you have ample time to review and reorganize your portfolio.

The NASAQ 100 printed a lower low and a lower high but left a positive candlestick on the chart. Clearly the market rejected the lows. We also see a 13 count on the chart. We have divergences with the stochastic indicator, our own indicator and the RSI which are all turning to the upside from oversold levels. We did have two mechanical sell-signals; one issued on October 19 and another issued on October 24, 2012. We are below the 100 day moving average but remain above the 200 day moving average. We did poke through the 200 day moving average but quickly rejected the level and rallied higher. The 5-period exponential moving average is 2665.16. The top of the Bollinger Band is at 2843.99 and the lower edge is seen at 2620.43. We are below the Ichimoku Clouds for the daily time-frame but above the clouds for both the weekly and the monthly time-frames. Just looking at the chart and the information that it gives us, we believe that this market will rally, not as in a bull market but in an effort to purge itself of the oversold condition. The downward trending channel lines are 2742.17 and 2633.88. We believe that much tax loss selling has been seen in this index as mutual funds close their books for 2012. We should see this market firm up or, we are wrong and the selling will continue. Market Profile shows us that the strength, what there was of it, was seen in the later part of the session but the selling appeared early on. It is a wonderful example of human behavior rejecting the edges of the bell shaped curve and returning to the middle part.

The Russell 2000 left a doji-like candlestick on the chart as a result of the Friday session. We are in a clear down trend. We are below the Ichimoku Clouds for the daily time-frame but above the clouds for the weekly time-frame. The 5-period exponential moving average is 815.53. The top of the Bollinger Band is 847.24 and the lower edge is seen at 807.23. The stochastic indicator has just issued a sell-signal nearing oversold levels. Our own indicator is not issuing anything of value. The RSI is pointing lower near oversold levels and the Thomas De Mark Expert indicator is flat at oversold levels. The market closed below the 100 day moving average. This chart looks very organized with little hysteria. It just seems to want to go lower.
The Market Profile chart closed in the bulge of the chart. The early and late trading seem to have been at the same level. The Point and Figure chart shows us that we are not going anywhere fast. We have unfulfilled upside and downside targets. Remember the Russell 2000 is generally the source of end of year tax selling and the beneficiary of the “January Effect.” Lighten up on issues that are not performing well.

Crude oil looks lousy. There is no nice way of stating that this product is in a very clear down trend. We are below the Ichimoku Clouds for both the daily and the weekly time-frames. The weekly chart indicates that we would need to close above 95.09 to turn the market positive on crude oil. The 5-period exponential moving average is at 86.93. The top of the Bollinger Bands is 94.75 and the lower edge is seen at 85.39. The downward trending channel lines are 91.67 and 83.03. We do see divergences in the oscillators. The stochastic indicator is issuing a buy-signal as is the RSI; we could see a bounce in the near-term. The Point and Figure chart verifies the concerns we have regarding this product. The Market Profile chart tells us that we are in the comfort area of the chart.

Although gold closed higher than its opening price in both the Thursday and Friday sessions, it looks as though it will continue to retreat. The downward trending channel lines are 1729.45 and 1692.25. We are inside the Ichimoku Clouds for the daily time-frame but remain above the clouds for both the weekly and the monthly time-frames. Although we are oversold as measured by the stochastic indicator, we continue to see downside pressure on this product. The RSI is curling to the downside. The 5-period exponential moving average is at 1715.20. The top of the Bollinger Band is at 1803 and the lower edge is seen at 1695.35. We are in the comfort zone in the Market Profile chart. The Market Profile chart tells us that under 1695 we will likely see 1680 and below that…..look out below. We see 1597 or so as the next resting place. Although we have been gold bugs for a while we are cautious on the yellow metal and believe that we will continue to feel pressure in this product. Just keep a core position in gold.