Archive for March, 2014

Sunday, March 30th, 2014

We are entering the close of the first quarter and as such the earnings parade will start anew. You can bet your Bitcoin dollar that much blame for any slowdown will be given the horrid weather. That said, we will see companies defer to the next quarter with anything beginning to sound optimistic. We do believe that the public is getting to feel a little better about life. Unfortunately, the records prove that the typical middle-class earner has not enjoyed a bump upwards in income in some time. Further, after essentials are paid for, the Joe and Jane earner has less money in hand than they did several decades ago. That is why spending is restrained. The job market seems to be loosening up a tad, which would be a good thing. Now we need some pay boosts to help along the wage earner. No, this is not a commentary on minimum wage. We believe that wages will rise when demand appears.

The S&P 500 looks like a distribution top. We thought that perhaps the formation was a head and shoulders but now it looks as though it could be an “M” formation. The rules regarding that pattern suggest that once the neckline is broken, 1823.85 (June futures), that the downside target would be 1721.25. That said, we do have a “Jobs” report to look forward to on Friday. Given that the bad-weather blamed for the previous two months lousy reports, this March report should be a winner insomuch as there was no really bad weather to have caused a major shut down in the jobs market. Actually the snow did provide some temporary jobs for snow removal people and all industries akin to providing help and care for a snow bound public. We shall see.

Russia has taken some of the news heat away from the Middle East which continues to remain as a powder keg. China’s slowdown is also taking a back seat to the military movements into the Crimea and around the Ukraine. This attention does nothing to remove the aforementioned problems just hides them for a while with attention focused on the current problems. Then there is Egypt. The world is a complicated place.

The good news on the S&P 500 is that as the market has been selling off, or looking like a distribution, some of the indicators that we follow are making higher lows which, is a divergence. That divergence does not assure you that the market will rally, but rather tells you that something has changed in the market. Something is warning you that there could be a change in direction. The uptrend line, using only two points, held, the market stopped at the downtrend line. The 5-period exponential moving average is 1851.32. The top of the Bollinger Band is at 1888.13 and the lower edge is seen at 1835.08. We have a buy-signal issued by the stochastic indicator, the RSI and our own indicator. We would watch 1834 and 1830.50 as levels that must support this market. Should those levels fall, things could and likely would get very ugly very quickly. The 0.1% by 3-box 60 minute point and figure chart has a downside target o 1774.48. We see a downtrend line and an internal uptrend line. The RSI is curling over as is our own indicator. The daily 1% by 3-box chart continues to look bullish, however; when we adjust the box size lower to 0.7% we get a very negative downside target. Bottom line is this: we expect the market to rally in the Monday session but then pull back awaiting the “Jobs” data.

The good news here is that the NASDAQ 100 is above its 200-day and 100-day moving averages, the bad news is that it currently is below the 50-day moving average and all of the other shorter term moving averages. The best we can bring to you is that the indicators that we follow have just issued a buy-signal. Then again, this could be a one-day-wonder or a grinding sideways move. It is difficult to tell giving the current action of the market. The 5-day exponential moving average is 3591.98. We are in the Ichimoku Clouds for the daily time-frame and above the clouds for both the weekly and the monthly time-frames. We remain above the uptrend line for the weekly and monthly time-frames, although the indicators for the weekly and monthly time-frames remain negative. The top of the Bollinger Band is at 3741.22 and the lower edge is seen at 3387.64. It is interesting to note that the volume picked up in the Friday session which showed a gain of 9.75 points. Then again could be the end of the month and quarter portfolio dressing and undressing, we do not know. If this market can close above 3601.25, the shorts will become concerned and begin covering their positions. The downtrend slope is too steep to continue and will either flatten out or attempt to rally. Monday is the last trading day of the month so expect to see some adjustments. Stay alert and keep tuned for the next adventure that is sure to follow.

The Russell 2000 gapped lower on Monday and never looked back. Although Friday’s session printed a higher high than was seen in the Thursday session, the market closed only marginally higher than the previous day and below the opening level. This action left a red candlestick on the chart, not a good thing. That said, this market did not print a lower low and closed inside the lower Bollinger Band. The pattern seen for the Russell 2000 is an “M” pattern. We stopped at a ledge in the chart and it is possible that we will test the 1080 level in the not too distant future. The 5-period exponential moving average is 1159.84. The top of the Bollinger Band is 1222.77 and the lower edge is seen at 1148.06. The Bollinger Bands are expanding telling us that volatility is on the rise. We are above the Ichimoku Clouds for all time-frames.

Crude Oil rallied in the Friday session. The up-trending channel is 102.12 and 99.26. The upper line was pierced in the Friday session. The 5-period exponential moving average is 100.71. The top of the Bollinger Band is 103.96 and the lower edge is seen at 96.87. We are above the Ichimoku Clouds for all time-frames. We believe that this market will likely back and fill or retreat briefly to purge itself from is overbought state and then, we could see a run to 103 and then 105. The 1% by 3-box daily point and figure chart has both upside and downside targets. The downside, most recent target is 84.50 and the upside target is 137.75. The 60 minute 0.2% by 3-box chart has an upside target of 103.07. This chart looks very positive.

Gold ended the week with a very muted rally after suffering a waterfall to the downside. The gold market continues to push lower printing another lower low for the week in the Friday session. The 5-period exponential moving average is 1304.11. The top of the Bollinger Band is 1387.02 and the lower edge is seen at 1287.77. We are just barely above the Ichimoku Clouds for the daily time-frame, below the clouds for the weekly time-frame and just below the clouds for the monthly time-frame. All the indicators that we follow herein are oversold yet have not issued a buy-signal. We would not be surprised to see gold test the 1260 level. Although the daily 1% by 3-box chart looks constructive, we are cautious on gold. The 0.1% by 3-box 60 minute chart clearly shows the deterioration of gold. There is an upside target of 1317.39 but there are multiple internal downtrend lines and a downside target of 1263.23, which agrees with the projection from the candlestick chart.

The US Dollar Index rallied in the Friday session leaving a pennant like formation on the chart. We believe that this pennant will resolve itself by April 2, 2014. All the indicators that we follow herein are pointing higher. We do see some resistance at 80.37 and then at 80.59. The 5-period exponential moving average is 80.22. The top of the Bollinger Band is 80.55 and the lower edge is seen at 79.28. The 0.25% by 3-box daily chart has an upside target of 86.01 and a more recent downside target of 79.01. The chart really isn’t giving us any good information. The 60 minute 0.1% by 3-box chart is giving us a better view. We have an upside target of 81.0287 and a downside target of 78.87. There is a good uptrend line and no current downtrend lines. This chart is more positive than is the daily chart. The Market Profile chart does give us some concern insomuch as we are below the horizontal upper line. Time will tell us the story.

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