Saturday, 26 July 2014

Market Analysis Jul 26th

It's been 2 weeks since we updated our analysis. Our thesis (BULLISH = bonds, commodities, foreign currencies and emerging markets; BEARISH = US equities and US dollar) remains intact. Let's take a tour of where all asset classes stand

EQUITIES

The S&P 500 and Nasdaq are still sitting at long-term resistance, while the VIX is at long-term support. Refer to the charts from my previous post.

BONDS

TNX (10-year note YIELD) continues to form a topping formation with bearish RSI divergence. Watch for the blue neckline to break down (a positive for gold and the yen)


UST (10-year note BOND) is basing above 14-year support. Watch for a breakout above the green downtrend line.



CURRENCIES

USD: There's a ton of chatter out there about how the US Dollar is breaking to the upside. The weekly chart shows this clearly. However, the monthly chart shows that there's mega resistance at the 82 level. This is just ~1% above current levels.


EFA:SPY ratio has a strong inverse relationship with US dollar. It is currently on price & RSI support. A breakout above the blue downtrend line would be bad news for the dollar (especially now that the dollar is nearing strong resistance).


YEN is the other key chart I'm watching in the currency space. We should get wedge resolution soon.


COMMODITIES

Many commodity charts are simultaneously retesting their multi-year breakouts as new support. This can be seen on:
  • GNX and CCI commodity indices
  • GOLD and the SILVER:GOLD Ratio
  • COPPER
  • GAS and OIL





MINERS

Similar to the underlying commodities, the miners are also retesting multi-year breakouts as new support. This can be seen on:
  • XME (Mining & Metals ETF)
  • GDX, GDXJ, GLDX, SIL (Gold Miners)



KOL is breaking out of a 1-year base after its 3-year wedge breakout


REMX is forming a base after a 3-year wedge breakout. 


URA is retesting a 1-year base breakout after making a 3-year wedge breakout.


EMERGING MARKETS

EEM:SPY ratio is highly correlated with GDX. This ratio is breaking out of a wedge consolidation (daily chart) after a multi-year wedge breakout (weekly chart).


SSEC Shanghai Index has finally made the breakout from an 8-year wedge!


Hope you enjoyed this analysis and have a great weekend

Monday, 14 July 2014

Market Analysis Jul 14th

Most of the charts I post are weekly charts that are slow to change. If you've been a regular reader, I know these charts are starting to look repetitive. Just keep in mind that weekly charts remove the daily noise and show us the big trend. This big picture and ample patience is ultimately what makes us the real profit.

"The big money was not in the individual fluctuations but in the main movements that is, not in reading the tape but in sizing up the entire market and its trend…The market does not beat [traders]. They beat themselves, because though they have brains they cannot sit tight… After spending many years in Wall Street and after making and losing millions of dollars I want to tell you this: It never was my thinking that made the big money for me. It always was my sitting." - Jesse Livermore


US EQUITIES

SPX and COMPQ (Weekly) are facing major long-term resistance with bearish RSI divergence...



... while TZA (3x Small-Caps Bear ETF) and VIX (Weekly) are at key support with bullish RSI divergences. 


CURRENCIES

EUR (Weekly) is currently on 2yr price support, 4-yr RSI support and 6-year MACD support. I'm watching for these levels to hold.


YEN (Daily) has been coiling up all year and is now nearing wedge resolution. Looking for an upside breakout due to the bullish RSI divergence. This would have a very positive impact on gold & bonds; negative impact on USD & US stocks


EFA:SPY (Our good friend and arch-nemesis of the US dollar) is on RSI support. A breakout from its 5-year downtrend will be a huge positive for commodities and negative for the dollar.


USD (Weekly) is still stuck in a wedge. A weekly close below 79.50 (less than a 1% price drop) would decisively break 2-year support. Strength in either the EUR, YEN, EFA:SPY can cause this to happen.  


COMMODITIES

After bottoming on 14-year support in early June, Gold rallied through a 2-yr downtrend. Today's big $30 drop in gold has it retesting that former downtrend as new support.


Gold Miners (GDXGDXJGLDXSIL) have all broken out of a 1-year base, which is now being tested as new support. Watch for the red lines to hold.


CDNX (Weekly) has broken out of 10-year resistance and is now testing it as new support. Watch for it to hold


XME (Weekly) broke out of a 2-year inverse H&S base and is now testing it as new support. 


REMX is rallying after retesting a 3yr downtrend breakout last week


Nat. Gas and USO (Weekly) are both retesting major support. Watch for these levels to hold


JJC (Copper) and JJU (Aluminum) continue to hold their 3-year wedge breakout that I posted previously. 

DBA (Weekly) has now retraced 61.8% of the +25% gain it made earlier this year. Not only is it on an important Fibonacci level, its also on RSI support.  


CCI:SPX (Weekly) ratio is retesting 3yr falling wedge breakout


EMERGING MARKETS

EEM:SPY (Daily) has been coiling inside a 4-month wedge that's nearing completion. Recall that this ratio has a strong positive correlation with GDX


SSEC (Weekly): Don't lose sight of this massive 8-year wedge that is nearing completion!


SUMMARY
  • US Equities are at key long-term resistance
  • Euro, Commodities and the VIX are all sitting on key support levels
  • Important wedge resolutions coming up in the Yen and Emerging Markets
That's all for now. Take care

Sunday, 6 July 2014

Market Analysis Jul 6th

This is just a quick update to our on-going asset class analysis. For a more detailed coverage, see this post from June 6th.

TREASURIES

UST (10-year Treasury Note) suffered some weakness this week. We're nearing 15-year support again: watch for it to hold.. Ultimately, I expect the bullish RSI divergence to cause a breakout above the falling green downtrend.



CURRENCIES

Recall that the USD has a strong inverse relationship with the EFA:SPY ratio


Currently, the EFA:SPY ratio is nearing decision time. The bullish RSI divergence suggests we are likely to see an upside breakout, which would be bearish for USD and bullish for commodities.


Meanwhile, I continue to keep an eye on this chart for the Euro, watching for the uptrend to hold



COMMODITIES:

This week, JJC (Copper) made a 3-year wedge breakout!


Add this to our list of confirmed 3-year breakouts in:
  • GLD, SLV, SLV:GLD (Gold, Silver Spot Price)
  • GDXJ, GGGG, HUI:GOLD (Gold Miners)
  • REMX (Rare Earth Miners)
  • URA (Uranium Miners)
  • KOL (Coal Miners)
  • USO (Oil Fund)
  • LIT (Lithium Miners)
  • JJU (Aluminum Spot Price)
  • COPX (Copper Miners)
  • CDNX (Canadian Venture Exchange)
  • CCI:SPX
  • EEM:SPY
  • EEM (Emerging Markets)


Thursday, 3 July 2014

Gold is Ready to Lift



First, a quick recap:

  • 4 weeks ago, we looked at how gold & gold miners were on key support (see Analysis Jun 6th). GDX then staged an impressive 20% rally in just a little over 2 weeks. 
  • More & more evidence piled in that we're set for a major rally that can last several months. This included: Multi-year breakouts on record volume, silver finally outperforming gold, and inter-market clues (See: Take you Pick of Gold Breakouts and Third Time's a Charm). 
  • Early last week, we pointed out some interim resistance (see The Next Hurdle). Today, after a very healthy week of consolidation, the gold space has cleared this hurdle. Let's take a tour

Gold Daily Charts:

Spot Gold has broken out of 2-year falling resistance. Today's candle retested this line as new support


GDX, GDXJ and SIL have all broken out of 1-year falling resistance this week!




Finally, the Gold:Miners ratio has broken a 2-year neckline this week. Typical of a new bull market, expect the miners to outperform gold here


Other miners (Uranium, Coal and Rare Earths) also continue to show nice follow-through. I'll try to do a more detailed analysis over the weekend.

That's all for now. Happy 4th of July to all American readers!

Monday, 30 June 2014

Take your Pick of Gold Breakouts

Today marked the end of the June trading month and take a look at where GDXJ finished: +24% price gain with over 125 million shares traded. This is both a record in monthly price gain and volume for GDXJ!


Why is this significant right here, right now? In this post, I want to show 6 charts that show major, multi-year breakouts that have been completed in the gold space. 

First, here's Gold and Silver. After testing its 12 year uptrend, Gold rallied to breakout from a 2-year downtrend. And Silver has broken out of a 3-year downtrend


Next, we have the gold miner ETFs. GDXJ made a 3-year falling wedge breakout earlier this month and then rallied on strong volume. Both GDX and GDXJ are currently breaking out of a shorter, 1-year resistance.  


Finally, here's a look at Silver and Gold Miners relative to Gold. Both the HUI:GOLD and SILVER:GOLD ratios made a 3-year downtrend breakout.


Don't forget, these breakouts are accompanied by:
  • Huge volume
  • Bullish momentum divergences
  • Negative sentiment
And there you have the right ingredients for a big market move. Stay tuned!

Saturday, 28 June 2014

Market Analysis June 28th

We continue to see incremental progress every week on our thesis: Bullish commodities, treasuries, foreign currencies, emerging markets while bearish US equities and USD.

US EQUITIES

In my June 6th Analysis I showed:

  • IWM is forming a H&S top formation with bearish RSI divergence
  • TZA (3x Inverse Russell 2000 ETF) is retesting a 5yr falling wedge breakout
  • VIX (Volatility Index) is sitting on 12-year price support
  • Consumer Discretionary Stocks have been lagging Consumer Staples

The following Equity Put/Call Ratio chart comes from the talented Jesse Stine (@InsiderBuySuperstocks on Stocktwits). Just like the VIX, the Put/Call ratio shows that investors have become complacent. It does not pay to be long the US equity market here.




TREASURY BONDS

We posted the UST (10-year Note) weekly chart previously, which showed a double bottom on 14-year support with bullish RSI divergence.

TNX (10-year Note Yield) daily chart is the one I continue to watch closely. This week, TNX fell after hitting both price & RSI resistance. Because of the bearish RSI divergence, I'm looking for a breakdown of the 1-year neckline shown in blue. This would also be bullish for Gold and the Yen.



CURRENCIES

This week, the YEN became the star after reclaiming its 40-WMA and making a 1-year RSI breakout. Very bullish action.


Recall, the Yen is positively correlated with Treasury Bonds and Gold, while inversely correlated with Nikkei, US Equities and US Dollar.

Speaking of the Nikkei, it made a failed breakout on the weekly chart. We may be seeing the right shoulder of a H&S top forming. Notice the bearish RSI divergence as well.


USD is still stuck in a wedge on the weekly chart - I'm looking for a breakdown of the 2-year support. Meanwhile, EUR is nicely holding its 2-year price & RSI uptrend on the weekly chart.



GOLD

In the last post (The Next Hurdle), I showed how Gold, GDX, GDXJ, GLDX and SIL were all facing 1-year falling resistance. Here it is on the GDXJ daily chart:


The weekly chart shows that the big picture is very bullish: GDXJ made a 3-year falling wedge breakout on record volume and leading momentum. It's only a matter of time we blast through the 1-year resistance and when it does, the real fun starts (see also my post Third Time's a Charm)


This week was the first weekly candle that opened & closed above a 3-year downtrend on both the HUI:GOLD and SILVER:GOLD ratio charts. Again, a very bullish big-picture.




COMMODITIES

Just like Gold and Gold Miners, other commodities & miners are also facing interim hurdles: 
  • DBC (Commodity Index) - Facing 3-year downtrend resistance
  • JJC (Copper ETF) - Facing 3-year wedge resistance
  • KOL (Coal Miners ETF) - After breaking out of a bigger 3-year wedge, KOL has now been trying to breakout of a 1-year base for 9 consecutive weeks! I expect the eventual breakout to be big.     




However, this week we have seen some commodities/miners make fresh breakouts! JJU (Aluminum ETF) made a breakout from its 3-year falling wedge



Also, REMX (Daily) broke out of a 2-yr downtrend and URA (2-hour) broke out of a 4-month downtrend. Both these ETF's already made bigger, 3-year breakouts + successful retests on their weekly charts. 


And soft commodities (Wheat, Corn, Cotton, Sugar) are all sitting on long-term support here



That's all for now. Hope you found this analysis useful and enjoy the rest of your weekend!