Archive for February, 2014

Sunday, February 23rd, 2014

The snow here in the NYC Metro area has finally started to melt and the weather has turned milder, as a reminder that winter is drawing to a close. We are due for more bad weather and cold temperatures in this coming week but we finally see the end of winter and snow storms approaching.

The economy is looking for its green shoots of spring leading to a rebirth in the current economic expansion and although the progress is extremely slow, we seem to be inching forward ever so slightly. Much press has been given to the extraordinary weather seen these past few months. Clearly, one wouldn’t go car shopping or house shopping in a snow storm. With that thought in mind, we wait to see what happens when the weather turns milder and people emerge from their winter hibernation. It is also interesting to see how much discretionary income will be left after all the winter heating bills and increased grocery costs are factored into the budget. We understand that we want to go shopping but can we is the question or, will we go back on a spending spree increasing our revolving credit hoping that we will get a salary increase or perhaps a job that fits our skills. Hoping and wishing isn’t a good way to budget anything. We have noticed that the cost of apparel continues to be cheap, so long as you do not buy designer anything. Should you step into that realm, you will be “soaked” for sure.

It is doubtful that our government will see inflation anytime soon because of the data used in that calculation. Clearly the formula used by the data crunchers is out of touch with reality and the actual costs of survival. The government measures do not include food and energy which is a vital cost for anybody who is responsible for those payments. The cost of education, tolls, healthcare etc. has been on an upward tear. The problem with increasing costs at the grocery store is that food must be purchased even if it is more expensive so it is a cost that cannot be avoided. If you don’t have the budget, you can cut back on discretionary things, like buying clothes, going to the movies, going out to dinner or buying those extras. Food, not so much, yes you can cut down on expensive fruits and vegetables and replace them with cheaper products but you are still buying consumables. It is amazing that buying healthy food choices is getting too expensive for many of us. Wonder why we are obese in this country; look no further than the grocery bill. Pasta and carbs are cheaper than fresh fruits and vegetables.

The S&P 500 retreated ever so slightly in the Friday session losing about 0.15% on the day. We have a 9 count on the chart and signs of exhaustion. It is also interesting to note that the index has tried and failed to remove the high of 1846.50 printed on December 31, 2013. There have been at least eight attempts to take out that high and failure on each attempt. This does not mean that the index will not try again, it surely will. It does, however; highlight that the current high, 1846.50 is an important barrier and once removed, will likely spur a violent move. The uptrend line is 1833.66 for the Monday session. The stochastic indicator and the RSI have all curled over to the downside. Our own indicator continues to point higher although it seems to be losing momentum. The Thomas DeMark Expert indicator is neutral. The 5-period exponential moving average is 1831.57. The top of the Bollinger Band is at 1863.37 and the lower edge is seen at 1729.47. We are above the Ichimoku Clouds for all time-frames. The 60 minute 0.1% by 3-box chart has a good uptrend line and an internal downtrend line. This market seems to be stalling and needs to push above the multiple tops at 1843.17. The 1% by 3-box chart has an upside target of 2278.81, however; if we use a 0.9% by 3-box chart, there is not upside target. This chart is bullish, no question about that. We do have concerns regarding the lack of real volume on the moves higher. The volume hasn’t been awful but needs to expand to validate this up move. It is interesting to note that the 20-period moving average has crossed below the 50-day moving average and that is certainly not bullish. If short, cover any short on a rally above the December 31, 2013 high, if long; get out should the market close below the uptrend line for two consecutive days.

After the NASDAQ 100 printed a fresh high for the year in the Friday session, the profit takers flattened their positions and the index closed the session losing 0.21%. We have a 9 count and signs of exhaustion on this chart. The stochastic indicator, our own indicator and the RSI all are pointing lower. The Thomas DeMark Expert indicator is flat at neutral. The 5-period exponential moving average is at 3660.17. The top of the Bollinger Band is 3738.67 and the lower edge is seen at 3393.82. Although this market printed a new high for the year, the volume on that push higher was disappointing. Our bottom line here is that we expect to see this market retreat or at the very best, back and fill for a while. Should the market close below 3638.25 for two days, then the door will be open to 3596.75. We are above the Ichimoku Clouds for all time-frames. The daily 1% by 3-box daily chart looks bullish. The 60 minute 0.25% by 3-box chart is also very bullish with an upside target of 3685.79.

The Russell 2000 rallied in the Friday session adding 3.40 on the day. We are within the upward trending channel lines of 1179.77 and 1144.66. So far those who purchased the Russell 2000 as it crossed and stayed above the 5-period exponential moving average have done really well on that trade. The 5-period exponential moving average is 1154.56. The top of the Bollinger Band is at 1172.66 and the lower edge is seen at 1083.27. The stochastic indicator continues positive at overbought levels and appears to be curling downward. Our own indicator has not issued anything and remains neutral. The RSI continues to point higher although it is losing momentum to the upside. The Thomas DeMark Expert indicator is neutral and flat. We do have a 9 count and continued signs of exhaustion. We are so close to the high of January 23, 2014 (1181.30) that it is likely that we will try to remove that high on this push to the upside. The Russell 2000 is above the Ichimoku Clouds for all time-frames. Bottom line is this, so long as the market stays in the current uptrend, we will continue our upward direction. We caution that this market could turn on a dime and therefore tight stops are needed. This isn’t a market to ignore and it is a market which must be closely watched.

Crude Oil retreated in the Friday session but remains firmly planted in an up trending channel. The 5-period exponential moving average is 102.35. The top of the Bollinger Band is 104.07 and the lower edge is seen at 94.92. The up trending channel lines are 104.22 and 100.07. We are above the Ichimoku Clouds for all time-frames. The 60 minute 0.25% by 3-box chart continues to look healthy. The daily 1% by 3-box point and figure chart does have an imposing downtrend line on the chart. All of the indicators that we follow herein are issuing a sell-signal and we will monitor this closely insomuch as the last sell-signal was extremely short-lived and reversed itself quickly. As this market makes progress to the upside, it is faced with lots and lots of supply thus, it is difficult for this market to ramp up quickly. We believe that this market probably will return to the 100 level where it should find support. Should that level fail to hold the market, expect a return to the 97.50 or so congestion area on the chart.

Gold rallied in the Friday session. The 5-period exponential moving average is 1319.10. The top of the Bollinger Band is at 1341.78 and the lower edge is seen at 1223.44. The upward trending channel lines are 1340.41 and 1279.24. The volatility is expanding so expect to see some violent moves in both the up and the downside. We note that the 60 minute 0.50% by 3-box reversal point and figure chart looks extremely bullish. The daily 0.75% by 3-box reversal chart has an upside target of 1384.25 and looks very bullish. At the moment, we have mixed signals issued by the indicators we follow. Our own indicator has issued a sell-signal which could change directions within a day or so. The RSI is overbought yet pointing higher. The stochastic indicator remains positive at overbought levels. The Bollinger Bands are expanding indicating that the volatility is rising. We are above the Ichimoku Clouds for the daily time-frame, below the clouds for the weekly time-frame and in the clouds for the monthly time-frame. We are overbought for both the daily and the weekly time-frames. Keep your stops tight and understand that this market has rallied in recent days and a pause or pull-back is likely.

The US Dollar Index had a slight pull-back in the Friday session. We were able to draw two different channel lines, one going down, the longer of the two, and one going up. The shorter trend is to the upside. The down trending channel lines are 80.416 and 80.176 the shorter up trending channel lines are 80.578 and 79.691. The 5-period exponential moving average is 80.285. The top of the Bollinger Band is 81.456 and the lower edge is seen at 79.885. Our own indicator has issued a buy-signal. Both the RSI and the stochastic indicator are rolling over to the downside. The 60 minute 0.05 by 3-box reversal point and figure chart continues to have a downside target of 79.95 but shows an internal uptrend line. The daily 0.2% by 3-box reversal chart has a consolidative look to it. We have both upside and downside targets and no clear direction. At the moment we have no observable uptrend line.

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