Tuesday, June 30, 2009
Dow Jones Financial has formed a descending triangle if it won't move higher to to take out 220 things get ugly. As I mentioned before if it breaks the 202 would be the signal for bears to come out their caves and push the index lower.
Monday, June 29, 2009
The number of U.S. workers filing new claims for jobless benefits unexpectedly rose last week and the number staying on the rolls after collecting an initial week of aid also edged higher, government data on Thursday June 25th showed.
Initial claims for state unemployment insurance increased by 15,000 to a greater-than-expected seasonally adjusted 627,000 from a revised 612,000 the week before, the Labor Department said. Analysts polled by Reuters had forecast claims to drop to 600,000 from a previously reported 608,000. so there is not much "green shoots" in job market.
The 0% Fed Funds and T-bill rates have helped create a Treasury yield curve that, in this case, is misleading ; as it has sometimes been in the past. Towards the end of 2001, the U.S. also had a steep yield curve, similar to the current environment. In swift fashion, the Fed had taken the overnight Fed Funds target from 6.5% at the beginning of 2001 to 1.75% by year’s end to combat a potential recession. On December 31, 2001, the 10-year T-note closed at 5.03%, which meant that a steep yield curve was in effect. Even though a steep curve existed, the S&P 500 did n’t bottom until 10 months later in October 2002, and it had another 31% to decline. So, the steepness of the yield curve couldn't’t prevent another leg of a bear market during most of 2002.
This example shows yet again that the tools that policy makers use are at the mercy of mass psychology. Social mood, currently suggests that we should prepare for an even more glaring example of the steep yield curve’s inability to come to the economy’s rescue.
A grand super cycle decline in U.S. equities accompanies a massive supply of T-bonds coming to market. In the market forecasting business, I try to look around corners before reaching them. In this case, I'm suggesting that the U.S. is going to see an equity and bond decline, with a further steepening of the yield curve, because the demand for US T-bills will continue to be high. As such, many market watchers will incorrectly suggest that markets are ready to bottom due to something that “should” allow an economy to function properly: a steep yield curve. In this instance, though, the steeper the curve, the larger the problems are likely to be. If mortgage rate keeps increasing it would harm the housing market, because it make the houses less affordable and refinancing less favorable, and this is what we need to avoid, if housing market won't recover this severe recession is going to become the great depression II. So there is not much "green shoots" in here either.
Treasury Yield Curve Rates Table:
Treasury Yield Curve Rates Chart:
Many in Wall street hope that China comes to the rescue the world, but China is not capable to do so. I need to mentioned that only 30% of Chinese GDP comes from consumer consumption vs 70.9% U.S. GDP comes from consumer consumption . If you are familiar with Chinese culture you knew Chinese people are more of the savers not spenders and this is in their blood, and it won't change overnight.
I need to remind my readers while the Shanghai composite index is up 70% since November, Chinese imports are down 25% from a year ago. China is still draining real stimulus from the global economy. They are the makers not the consumers period.
If the world's biggest surplus state $400bn is too structurally deformed to help offset the demand shock as Western debtors retrench, we are trapped in a long deflation slump which is in absolute contradicts with what Bernanke says. So there is not much "green shoots" in China either.
In the end 2Q earnings would be the silver bullet that could potentially clear the U.S economics outlook. We need to see revenue growth not cost cutting, obviously companies fired many employees and closed factories that would help them to save money, but cost cutting can't continue for ever. They need to make money. If by 3rd quarter we don't see revenue growth this rally will fall apart. With in the next couple weeks we will find out if there is any "green shoots" out there or Bernanke was hallucinating when he said "I saw the green shoots of economics revivals".
Bernanke in an interview on 60 Minutes said that he does “see green shoots of economic revival"!
Note 200 SMA acted as support, but in my opinion we are in consolidation phase. At this point you should watch to see if it can break above 927 in coming days or not. If S&P break 880 there is no reason to stay long.
May's low acted as support for Dow Jones if it breaks the 8200 level we should see the acceleration in sell off.
NASDAQ is the leader. It formed a new uptrend and 200 EMA became support, that is very positive. It's critical for bulls that NASDAQ won't violate the new channel.
Friday, June 26, 2009
Financials formed a bearish formation. In short term 11.30 is the most important level to watch. XLF hit the 200 SMA 3-times in recent weeks and every time it acted as resistance. We are getting close to hit it for the 4th times. It would be interesting to see what is going to play out.
You might want to check my article "Why did LIBOR & TED Spread drop?":
S&P500 could find support at 200 SMA next level to watch is 927~930.
S&P500 in short term: oversold
S&P500 in intermediate term: extremely overbought
S&P500 in long term: oversold to partial neutral
Dow Jones chart:
Dow Jones is beneath 200 SMA if it could move higher next stop would be 8607.
Dow Jones in short term: oversold
Dow Jones in intermediate term: extremely overbought
Dow Jones in long term: oversold to partial neutral
Wednesday, June 24, 2009
Dow Jones U.S. Financial could find supprt at 23.6% Fib-R. If it could shoot higher, it should run out steam at 20 or 50 EMA.
202 & 215 are levels to watch in short term.
Tuesday, June 23, 2009
United States Natural could not break out the 90EMA. If it drop below the dotted line you should get out or monitor it very closely. If UNG drops below 12.70 and stays there for 5 days or more you must get out.
Monday, June 22, 2009
Friday, June 19, 2009
Wednesday, June 17, 2009
Monday, June 15, 2009
For more pictures please see the link bellow:
Thursday, June 11, 2009
S&P500 60-Minutes chart formed a flag that should shoot higher. 950 is level to watch this week, if it could move above 950, the flag fomation would come to play. Note that if S&P500 stays above 200 EMA, it would have potential to test 1000 level. I'm not bullish by no measure,but tape signals possible move higher. On the other hand all indicators show over bought which is in contradict with pattern. Overall it shows the consolidation phase before a big move, If I get the chart right we should head lower in coming weeks. Question is; are we going down before S&P500 hit the 1000 or after that?
Tuesday, June 9, 2009
200 EMA & SMA are key levels to watch.
I highly recommend my readers to watch this video:
Monday, June 8, 2009
United States Natural Gas Fund has been in a saviour down trend in last couple months. Due to extreme over sold price, it could be ready to shoot up. This is a pure speculation trade, with no fundamentals to back up, you need to know that you like a tiny gold fish who jumped in the shark tank, they will swallow you in blink an eye, I would wait for big guys to find the bottom before I jump in.
Note that fundamentals do not support higher natural gas price, but it seems fundamentals do not matter to investors these days. The 12.70 is a very important support, if it does violate the support there is no reason to stay long. If it could move above 17.70 is very positive for natural gas in the weeks to come.
Saturday, June 6, 2009
Dollar could find support at 78.34 and it's headed to test the 50 SMA ,if it can move above the 82.6 it has chance to move higher. the failure to move above the 50 SMA will cause the big drop in dollar. Note that Fundamentals do not support the strong dollar because Bernanke & company keeps printing money and continuing to bailout his bodies in Wall Street.
It's a sad day for America when our secretary of the treasury takes his begging bowl to China to convince them to buy out debt, The irony is when Geithner told to one students in Peking University “Chinese assets are very safe,”. His answer drew loud laughter from his student audience, reflecting skepticism in China about future of dollar and U.S. Treasury.
Friday, June 5, 2009
I highly recommend my readers to check out this article. This is a compression of today's global crisis to the Great Depression.
World industrial production, trade, and stock markets are diving faster now than during 1929-30. Fortunately, the policy response to date is much better. The update shows that trade and stock markets have shown some improvement without reversing the overall conclusion -- today's crisis is at least as bad as the Great Depression.
Thursday, June 4, 2009
A total of $65 bln in 3-year, 10-year, and 30-year debt will be sold next week, the U.S. Treasury said on Thursday.
The sales will consist of $35 billion in three-year notes, $19 billion in 10-year notes, and $11 billion in 30-year bonds.
While next week's offering is smaller than last week's record $101 billion sale of two-, five- and seven-year notes, yields on all but the shortest Treasury maturities have recently risen to their highest levels in six months at least party because of the extra supply.
"All of these auctions are tests for the market," said Ward McCarthy, managing director and economist at Stone & McCarthy Research Associates in Princeton, New Jersey.
"It's like incoming artillery. As to whether or not the markets can handle all this stuff, the answer is 'Yes, they can handle it, but only if there are higher yields to make these issues more attractive.'"
Investors are also seeing in recent economic data the first signs that the recession may be bottoming out, meaning less need for the safe-haven of government bonds and more appetite for riskier bets on stocks.
"Confidence is returning to other markets and fears of deflation have given way to fears of inflation," McCarthy said. "This creates a toxic brew for the Treasury market."
Another issue that has worried the market is whether the huge amount of U.S. debt sales would repel some of the country's key sovereign creditors, in particular China.
But the most recent Federal Reserve data has shown that overseas central banks continue to increase their holdings of U.S. Treasuries, even after Standard & Poor's warning on Britain's AAA rating sparked concern the U.S. economy might be headed for a similar fate.
Thomas Higgins, chief economist at Payden & Rygel Investment Management in Los Angeles, said the market had a "completely preverse" near-term preoccupation with supply.
"In three months, economic data will matter a whole lot more to the market than supply, but right now the market is focused on supply and what it perceives as inflation," said
"Supply only matters in the very long-term, but the market is viewing it as a very near-term issue, Higgins said.
"In a recession, demand is falling so prices fall and you typically see lower bond yields," he said. "But right now you're seeing bond yields rise and no one thinks they will stop rising after the next week's auctions."
What will reverse the global rise in government bond yields will be the softer economic data that will come about as a result of those higher interest rates, Higgins said.
"The first place you will see that show up is in housing and we're already seeing that in the latest re-fi numbers which showed that mortgage refinancing applications were down 16 percent week in the latest week and were down 14 percent the week before," he said.
If yields stay high enough long enough to threaten a still very nascent - perhaps even theoretical - economic recovery, that could intensify discussion about further Federal Reserve purchases of government, agency and mortgage bonds.
200 EMA acted as resistance for Dow Jones transportation index, If it can move above the 200 EMA & SMA it would be very positive. 3427 is the level to watch for bulls , failure to move above it would be a clear signal to bulls to get out their long positions.
iShares Barclays 20+ Year Treasury Bond, May 18th.
iShares Barclays 20+ Year Treasury Bond, June 4th
Wednesday, June 3, 2009
The majority of investors think the March low was the bottom, I would say, "fool me once shame on you, fool me twice shame on me". Technically we are at the same position as we were last year at the exact time. You should remember CNBC lined up all the bulls that they could possibly find and they would come to TV and say "yeah this is the best time to buy, you missed boat you should jump before it gets too late..." and we know what happened in coming months.
In the last 2 days S&P500 is bouncing around the 200EMA. I talked about the importance of ~940 level in my previous post "The Significants Of 940 Level In S&P500".
We are due for pull back, we should of seen it by mid-May, but so far there is no sign of the pullback! I start to wondering if we are going to get the pull back ever!
As you see in the chart S&P500 has been moving in a channel since August 2007. It hit the channel 4 times, and it's getting close to hit it for the 5th times. If S&P500 moves to 950~960 and start to roll over to me that marks the start of the 5th sub-wave down. There is disagreement between technical analysts, some believe the March low was the end of the 5th sub-wave which marks the end to wave #1, but I think we are in 4th sub-wave up, and we didn't get the 5th sub-wave yet. If S&P500 moves above 960 it could shoot up to ~1000. If S&P gets above 1200 and stays above it for 2 weeks, it means I was dead wrong on my analysis and March low was the intermediate bottom. Please note if 880 support holds S&P500 could rally to 1200. It would be an ideal target for wave #2.
If S&P500 violates the 880 next major supports would be 740 then 666. If S&P500 break the 666 it should end up ~450. Note that ~450 is the 76.4% Fib-Retracement of the 28 years bull market.
Monday, June 1, 2009
1) ~940 was the January 6th high (943.85) .
2) It coincides with 200 EMA (945.86) .
3) It coincides with the upper side the May-Sep 2008 channel (Please see the chart, green line).
4) It coincides with upper side the current uptrend.
Considering all these points the ~940 is the most important resistance in coming days. The next resistance will be 960 (the lower side the Oct,07 -Sep,08 channel) please see the chart, I pointed in blue.
Note that we could not close above the Jan 6th high, S&P500 moved above it for a couple minutes but it failed to stay above it. Plus as I expected 200 EMA acted as resistance, as I said many times before close above 200 EMA for 3 days or more would be very positive, and increases the chance of continuation of the rally. A couple months ago if someone would tell me that we are going to hit 940 by June I would laugh, but anything is possible these days. I can't believe in my eyes anymore. Big institutions push the market up and have caused several shortsqueeze rallies. I don't see how could investores jump in market after +41% rally!
Dow Jones Financial Index is getting close to reenter to the up trend channel. It should experience difficulty and pulls back ,but if it does inter the channel it would be very positive.
Note that Dow Jones Financial Index could not reach the 200 EMA & SMA yet. They could act as resistance ,but if it break above 200 EMA & SMA it could continue to move higher.
In the past 6 trading days S&P500 clearly broke its up trend channel,but on Friday ( May 29th) institutions manufactured a rally in the last 10 minutes of closing and pushed the S&P500 back to uptrend,but it did not violate the down trend channel. If S&P500 could close above 930, it has chance to test the 200 EMA. If S&P500 could stay above 200 EMA for 3 days or more it would change the picture, and I have to change my forecast completely.
Note that there is no fundamentals to support this rally . I strongly believe this is a bear market rally,not a bull market rally.