From the Charts: Macro Week in Review/Preview September 17, 2010

The week began looking like Gold and the US Dollar Index might take a breather. US Treasury Bonds were on support but looked weak and headed lower. Although Oil was strong it was nearing layers of resistance which could take some time to work through. Volatility seemed to have found a bottom, although still weak, which would allow stocks to continue their move higher, towards a test of the top of the four month (or maybe one year) channel. I detailed this in the broad market trend reviewed Friday September 10th. The week started with a bang as the equity index ETF's went right to resistance on Monday and stayed there all week, except for the QQQQ which did not stop and is trying to drag the others higher. Gold and the US Dollar Index did rest for a couple of days before Gold started higher but the dollar broke lower and Treasuries started to lose their range lower. Oil did test the top of resistance and was smacked back hard. How does this set up for next week? Let's look at the details in the charts.

Gold Daily

Gold Weekly
Gold took Monday off then rocketed up to new highs on Tuesday, rested again Wednesday and created higher highs ending the week. With this move it now has support at 1270 and then 1255 and 1247.79 below. The weekly chart shows a continued move within the long upward trending channel through the 1255 area and onward now to the target of 1328. The Relative Strength Index (RSI) is indicating that it is getting a little overbought so it might rest again, but the trend and momentum is still higher. It wants more. This is re-enforced by the rising Simple Moving Averages (SMA's) and the positive Moving Average Convergence Divergence (MACD) on both the daily and weekly charts, with special notice to the MACD cross on the weekly chart.

West Texas Intermediate Crude Daily

West Texas Intermediate Crude Weekly
West Texas Intermediate Crude does not seem to want to join the party. Despite entering the week with positive technicals it tested the 200 day SMA and then rejected lower, as noted above, through the 50 ad 100 SMA's. With a bearish engulfing candle Friday it is hanging on support of 74.70, the 20 day SMA , by a thread with support lower at 72, and it looks weak. Should it bounce there is resistance at 75 and then the 76.22-.72 area followed by 77.76. A lot to work through to get back where it was on Monday. The MACD and RSI have also turned lower suggesting its upward run may be ending. Switching to the weekly chart, the consolidation continues below the SMA's with the 20 week SMA adding a negative bias as it crosses lower. Below the flag there is support at 71.19 and then 70. Should it break the SMA's higher there is resistance at 81.50.

US Dollar Index Daily

US Dollar Index Weekly
Speaking of weak, the US Dollar Index is the poster child. It fell right out of the blocks Monday and took another beating Tuesday. Since then is has created a bear flag with support at 81 and then 80.70 followed by 80. The weekly chart shows that it lost support at 82.08 and 81.63, the 100 week SMA. Both will now act as resistance. The MACD and RSI on the weekly chart appear very bearish. Should it miraculously rise from the dead, there is resistance at 81.72-82 and then 82.28-.44.

iShares Barclays 20+ Yr Treasury Bond Fund Daily

iShares Barclays 20+ Yr Treasury Bond Fund Weekly
My proxy for US Treasuries, the TLT, lost support of the 50 day SMA at 101.98 on Thursday and could not reclaim it. The bearish action within the positive candle Friday is also a sign of weakness. There is resistance higher near 103 from the upward trendline and 104.80 higher. the increasingly negative MACD and falling RSI suggest it is heading lower. Continued weakness sees support at 100 followed by 98.92. The weekly chart paints a similar picture with no new knowledge of support or resistance but a couple of key indicators to watch for. Fist this week's candle was a star signifying indecision so be nimble enough to react to a possible reversal. The MACD however is crossing lower and a falling RSI bode for more downside.

VIX Daily

VIX Weekly
There is not much to say about the Volatility Index. It has been in a range on both the daily and weekly charts for several weeks now between 21.25 - 28.4. the SMA's on both charts provide some resistance if the VIX were to move higher. Under the range the daily chart shows support at 18 and the weekly at 16.93.

SPY 60 minute

SPY Daily

SPY Weekly
The 60 minute chart shows clearly that the SPY is testing the 113.20 area for the third time in four months. RSI is falling but still near 50 and the MACD looks stable on this chart. It could go either way. There is support lower at 112.13-22 and then 111.68, and resistance above at 114.67 from May. Switching to the daily chart this week was a 5 day island gap up and is sitting against resistance at 113.25. Should it break through the next resistance is at 114.55. The MACD indicator is decreasing and the RSI is rolling over indicating that there may be a move lower. If so, support can be found at 112 followed by 111.28 and 110. The weekly chart printed a Doji star, signaling indecision, at the 113.26 resistance area. There is further resistance above at 114.67 and 115.38, and further support below at 110.26 then 109.20. There does not appear to be real power in either direction.

IWM Daily

IWM Weekly
The daily chart for the IWM shows a 5 day consolidation range between 64.50 and 65.50. It is slightly bearish as the real bodies became smaller Thursday and Friday and the shadows longer. But it did hold above the bearish 100 day 200 day SMA cross.The MACD is positive but starting to decrease and the RSI is flat lined. If it gets through 65.50 then resistance can be found at 66.50 and 67.25 higher. Support comes first at 64.52 and then 63.29. On the weekly chart IWM is up against resistance from the downtrend line 65.21. Resistance on a breakthrough comes at 70 higher. The tight SMA's act as support below as well as 58.68. The weekly shows the MACD crossing higher and the RSI rising giving it a slight bullish bias. Taking both the daily and weekly charts into account there is not a clear bias in either direction here either.

QQQQ Daily

QQQQ Weekly
The QQQQ is the anomaly in the Index ETF space. It had a strong gap up move Monday and kept going. Have broken and held the long term support/resistance level near 47.80 it is now ready to test the 48.50 May highs with resistance above that at 50.10. The RSI is only approaching being overbought near 70 and the MACD is positive but may be waning. The one bearish glimpse is the solid black candle indicating a bearish day Friday with in the up move, starting at the high and closing lower, also creating a bearish Hanging Man. If it falls then support can be found at 47 and 45.75-.90 lower. The weekly chart shows it at resistance of 48 from September 2008 with 50.55 as resistance beyond that. The converging 20 and 50 week SMA's provide support lower and then 43.80 before the 200 week SMA at 42.51. If you had to pick one broad equity index ETF that is heading higher this would be the one. The weekly also shows an increasing MACD and rising RSI. At least one index knows where it wants to go.

So next week looks to bring more new highs for Gold. US Treasury Bonds and the US Dollar Index appear to be heading lower. Oil looks will probably join them going lower as well. The volatility index does not seem like it will impede stocks but only the QQQQ's seem to know that they want higher with the SPY and IWM still scratching their heads about the next move. Good luck next week and trade well!

Some Precious Metals are More Precious than Others

Everybody is following the record prices in Gold these days. In fact they have been following Gold for several months now. This includes the new barber I went to today, cab drivers in New York City, my mom, the guy in the kiosk at the mall and everybody else you know. Here is why:

Gold Futures Continuous Contract 10 Year Chart


This is a 10 year chart and there is no doubt about what direction this metal has been heading and where it is heading. Even my three year old daughter can tell me the trend, even though it has been going on for more than 3 of her lifetimes. What about other precious metals though? They do not exhibit the same trending for this long period.


Gold Futures Continuous Contract 3 Year Chart
Let's zoom in on Gold to a 3 year chart you see a peak in March 2008 at 1034 and a trough in October and November of 2008 at 681. Since then Gold has moved up to highs in May and then today's new high close at 1268 or a 166% retracement of that move.

I chose this period because there is a similar peak and trough in the charts for Silver, Palladium and Platinum at these same places. Gold has always been a little bit different, despite being a precious metal. It tends more towards the non-tangible (inflation hedge, caveat currency...) and the cosmetic. Silver has similar desirability for cosmetic purposes but also has industrial use, and Palladium and Platinum are nearly totally used for industrial purposes. What do the charts for Silver, Palladium and Platinum look like over this period?

Silver Futures Continuous Contract 3 Year Chart
Silver peaked at 21.44 in March 2008 and hit a low 7 months later at 8.65. Since that time it has risen to close today at 20.58, retracing 93% of the down move. It had an interim peak just shy of 20 in May as well.

Palladium Futures Continuous Contract 3 Year Chart
Palladium peaked at 600 dollars in March 2008 and fell to 160 its low 8 months later. Since then it has risen to 567.50 in May 2010 and is now approaching that again closing today at 553.80. Today's price is a retracement of 90% of the 2008 down move.

Platinum Futures Continuous Contract 3 Year Chart
Platinum peaked at 2299 in March 2008 and bottomed at 752 that November. Since then it also had an interim peak in May 2010 near 1750 and closed today at 1607 a mere 56% retracement of the 2008 move lower.

What to make of these three charts in comparison to the Gold chart? First, they all have a long way to run if they were to mark their respective improvements from the November 2008 lows on the same scale as Gold. A 166% retracement would put Silver at 29.88, Palladium at 890 and Platinum at 3320, double where it is today. I am not forecasting these numbers as targets only pointing out how little these metals have moved in relation to the Gold move. The second point is that the peaks in May for Silver, Palladium and Platinum clearly illustrate how each metal is correlated to the stock market as this is just a one month lag to the top in the S&P 500 in late April. In fact Gold also peaked at this time but never really fell. Silver had the shallowest plunge and Palladium and Platinum, the two industrial metals, had the deepest plunges and are having the longest lag to recovering their highs, like the S&P 500. These two are clearly the most tightly correlated to the stock market. With the moves in Palladium and Platinum today, however, all are now breaking higher toward Gold. Will they all retrace 166%. Probably not but if the stock market does start to rise again look for the stars to be Palladium and Platinum from that point.

Trade'm well.

Fun with Charts: How Do You Tell the Difference Between a Miner and an Owner?

So much serious debate about whether the market is about to break through resistance and head higher or reject back down, I thought it was time for a little levity.

Why Did the Chicken Cross the Road?

A chartist's take on a joke can be quite funny. Take it from me. Days like today, with a large trend move in metals, make it easy to see through the marketing spin about whether a company predominantly owns metal reserves or is predominantly getting those metals out of the ground, despite what their website or Yahoo Finance says. So here goes..

Q: How Do You Tell the Difference Between a Miner and an Owner?

Here is the chart for iShares Silver Trust, SLV


iShares Silver Trust, SLV
Notice today's candle. It has a very small shadow, mimicking the candle in both the Gold and Silver commodity charts.

I have put the silver chart here for comparison.

Silver Futures - Continuous Contract


This is the one end of the spectrum. Other stocks like this include GLD, BAA, CEF, and GOLD.

Now look at Market Vectors Gold Miners ETF, GDX.

Market Vectors Gold Miners ETF, GDX
Notice that this chart shows a much longer shadow, indicating that the price action rose in tandem with the commodity price but then retreated a bit because it is not a pure play. You could probably line up all the candles from the miners and get a good estimate of just how 'pure' their business is. Others in this category include ABX, EGO, GG, HL, IVN, NEM, RBY, SLW and SWC.

A: Look at the Candles of the Stocks During Large Commodity Moves

Ha, ha, ha, ha. Gets me every time. So the next time you are at a bar or cocktail party with people who do things other than trade the markets, bring out this little joke to break the ice. You are sure to be able to enjoy your drink alone or get home early. Trade well tomorrow!

Top 10 Ideas for the Week of September 13, 2010

After looking at over 500 charts and posting my thoughts on many of them, I have found some good setups for the week. This week's mix contains 4 long ideas with 4 short setups, and three breakouts. These were selected in and should be viewed in the context of the broad market trend, reviewed Friday, which looks like there may be a pullback or at least a rest for Gold and a rest or maybe a rise for the US Dollar Index. US Treasury Bonds are on support but look weak and headed lower. Although Oil looks strong, it is at resistance and may need some time to work through it. Volatility seems to have found a bottom, although still weak, which should allow stocks to continue their move higher, towards a test of the top of the four month (or maybe one year?) channel.

Here are the top ten for the week in no particular order:


1. Canadian Solar, Ticker: CSIQ

Canadian Solar has just come out of a symmetrical triangle and had trouble moving higher with the 100 day Simple Moving Average (SMA) as resistance at 12.63. If it can get through it then the next resistance is at 13.50 followed by 14 and 16. The rising 50 day SMA is support at 12.17, and looks to help it get higher.

2. Patriot Coal, Ticker: PCX

Patriot Coal broke through the rising 50 day SMA Friday and is at a resistance area near 12 now. If it can get through 12 then the next resistance level is at 13 followed by 14. The rising Moving Average Convergence Divergence (MACD) and Relative Strength Index (RSI) also point to it going higher. The 50 day SMA at 11.80 will act as support now, with additional support lower at 11.50.

3. Cirrus Logic, Ticker: CRUS

Cirrus Logic had a rough week and it looks to get worse still. It lost the support of the 100 day SMA Friday and is at support near 15 from the beginning of July and late August. The 100 day SMA will now be resistance. If it falls under 15 the next support area is near 13 and then 11.63. The rolling SMA's, declining MACD and RSI all signal lower.

4. Novell, Ticker: NOVL

The down move on Novell stalled Friday at 5.50 which has been support previously in August. It looks to break this resistance level and test 5.40 and then 5.08, with a falling RSI and the MACD cross Friday. The 50 day SMA is also coming close to crossing down through the 100 day SMA which will add to the bear case.

5. Power-One, Ticker: PWER

Power-One has been bouncing off of resistance at 11.21 for several days now after a previous attempt in mid August. The rising trend line, shadowing the 50 day SMA now is creating an ascending triangle which is about to resolve. A rising RSI and MACD suggest it will resolve to the upside. If it gets through 11.21 the next resistance is at 13. If it rejects at 11.21 and back through the trend line near 10.20 then next support level is 9.50. A two for one potential play.

6. Shanda Interactive Games, Ticker: SNDA

Shanda double tapped support at 38.00 Thursday and Friday, a previous support level. If it bounces there then resistance is first at 40.67, the 50 day SMA, and then 41.47, the 100 day SMA. If it does not hold then support can be found lower at 36.33 and then 33.90. The prognosis is mixed as the 50 day SMA is starting to rise and the RSI is showing oversold, but the MACD still points negative and the 100day and 200 day SMA are also negatively sloped. Watch and play what it gives you.

7. Skechers, Ticker: SKX

Skechers was another stock that had a rough week. It exploded down through the 50% Fibonacci retracement level of 25 on huge volume Thursday. This level will act as resistance now. Despite the small price movement Friday on still large volume it looks like the selling is not over yet and it is prepping to fall further. If it gets through 22.50, a support level from late 2009, the next support is at 20.37, the 61.8% Fibonacci retracement level, and then 18.50. The MACD just recrossed lower indicating increased probability of this happening, although the RSI is slightly oversold.

8. Aeropostale, Ticker: ARO

Aeropostale has been in a range between 21.67 and 23 for a couple of weeks and is now testing the top of the range. The rising MACD and RSI suggest it might be able to work higher. Above this range it would see resistance at 24 and then 25.93 where the 50 day SMA is crossing down through the 200 day SMA.

9. Huntington Bancshares, Ticker: HBAN

Huntington Bancshares has been trying to break through resistance at 6 the last couple of day. This is also the 100 day SMA. If it can get through, then there is resistance at 6.35 followed by 6.75. The Increasing MACD suggests this is the path of least resistance. If, however, it rejects downward again and through the 50 day SMA at 5.77 then support can be found at 5.50 and then 5.32 lower.

10. Regions Financial, Ticker: RF

Regions Financial stock price has been caught on the 50/200 day SMA cross. It can break either way from here but the increasing MACD and relatively low RSI suggest that it might break higher. If it does then there is resistance at 7.34. If the break is lower then support comes at 6.35.


Bonus Idea: Chimera Investment, Ticker: CIM

This pick may take a while to play out. Chimera Investment, a Real Estate Investment Trust (REIT) has been trading in a narrow and tightening range for over a year after its fall in late 2008. It has met resistance at 4 several times along the way and appears to be breaking out above it now. The RSI has risen lately and the MACD which has been pegged near zero is also starting to rise. If it can detach from the 4 area then it can rise to resistance at 5 but it might take some time. With a near 20% dividend rate you can afford to wait for it to rise.

Have a great week and trade'm well!

The Bond Market as Seen through Stocks

There has been a lot of debate about whether US Treasury Bond yields have bottomed and are ready to rise. I do not claim to be an expert in this field so I cannot talk about the dynamics of increased issuance weighed against the increased demand due to heightened world wide sovereign risks. I will not discuss how front loading the debt issuance will create a much bigger problem down the road when rates start to rise, and should be putting upward pressure on yields. There are others like @Prof_pinch and @bondscoop much better equipped to deal in that space. But I do see something interesting when I look at the trio of Bond ETF's, TLT, iShares Barclays 20+Year Treasury Bond Fund (Treasuries) , LQD, iShares iBOXX Investment grade Corporate Bond Fund (Corporates), and JNK, SPDR Lehman High Yield Bond (Junk). The three charts are below:

TLT, iShares Barclays 20+Year Treasury Bond Fund


LQD, iShares iBOXX Investment Grade Corporate Bond Fund



JNK, SPDR Lehman High Yield Bond Fund


It is clear from these 3 charts that the TLT (Treasuries) led all bond ETF's higher and was the first to crack and start to fall. What is interesting is that it quickly pulled down the LQD (Corporates) but that JNK (Junk) has continued to stay at highs. Now TLT and LQD are sitting at support areas and the debate continues as to whether a bounce will happen or they will lose support and continue lower. The large issuance of corporate debt this week would suggest that the market expectation is for a fall. I suggest that one look to the JNK ETF for the answer. As long as JNK is continuing to hold up, it signals that traders and investors are comfortable with the risk in the US market place and they are continuing to reach for yield. If the JNK starts to fall, it could signal that traders and investors are bailing on the recovery and that sentiment might be changing to where the US is not seen as being safer than other parts of the world economically. At that point all three may continue to fall.

By the way, from the technicals, the TLT and LQD are exhibiting some pretty weak momentum indicators in the MACD and RSI right now although they are at price support. Also the dragonfly doji on the JNK Friday is a very bearish candlestick, despite being at new highs.

Watch the price action and trade'm well!

From the Charts: Macro Week in Review/Preview September 10, 2010

We came into this holiday shortened week expecting stronger prices for Gold again. The US Dollar Index and US Treasury Bonds were poised to continue their moves lower. Oil was set up for a move higher but without much room before it runs into a wall of resistance. A relatively low volatility index was creating the environment for stocks to push higher, also without a lot of room before resistance. I detailed this in the broad market trend reviewed Friday September 3rd. The week started as expected...for Gold anyway and nothing else. The US Dollar Index and US Treasuries bounced, and Oil and stocks sold off Tuesday. After a little ping pong the week now ended as expected for all indicators except Gold which ended flat and the US Dollar Index which rose slightly. There are some changes in expectation for next week. Let's look at the charts.

Gold Daily

Gold Weekly
Gold raced up to test the 1255 resistance level and then pulled back to 1245 support on Thursday. The support level held on Friday but the Moving Average Convergence Divergence (MACD) is now crossing on the daily chart, indicating an open environment to pullback further. There is support at 1237, 1233 and 1220. the weekly chart looks like a glass ceiling at 1255 which it cannot crack. If it can there is resistance at 1328 higher. I still expect it to reach new highs, but it may pullback first.

West Texas Intermediate Crude Daily

West Texas Intermediate Crude Weekly
West Texas Intermediate Crude seems to be breaking out of the 3 week flag to the upside. I have noted in the past that if it did there is a lot of resistance from both the daily and weekly charts at the Simple Moving Average (SMA) levels above. Friday oil blew through he flag resistance at 75.80, now support, and stopped right at the 50/100 day SMA cross near 76.50. The weekly set of SMA's are also very near by now as resistance at 77.30-.82. There is resistance higher at 77.78 on the daily chart and support lower at 74.80-75. Above the bands of SMA's the weekly chart shows resistance at 81.50 and also adds support lower at 72 and then 71.19. I expect it might take some time to get through this resistance but expect a big pop if it happens quickly.

US Dollar Index Daily

US Dollar Index Weekly
The US Dollar Index popped to the 20/50 day SMA cross and held there all week. There is resistance higher at 83.50 and then 84 and support lower at 82 all from the daily chart. The flat MACD and RSI give no clue to a future move. The weekly chart shows the beginning of a flag forming above the 82.08 support level. It also shows resistance at 83 and then 84.01 higher and support at 81.64and then 80.58. There might be a slight bias to the upside from the weekly chart with the rising SMA's and hold of support.

iShares Barclays 20+ Yr Treasury Bond Fund Daily

iShares Barclays 20+ Yr Treasury Bond Fund Weekly
My proxy for US Treasury Bonds, the TLT, jumped up Tuesday and proceeded top fall the rest of the week. It ended the week holding support of the 101.77-102.10 area. There is support lower at 100 and then 98. If it catches a bounce resistance can be found at 104 followed by 104.8 and 106. The weekly chart filled the gap from early August and and looks to be headed lower. It adds 102 as a support level and resistance higher at 108. The trend is clearly lower now.

VIX Daily

VIX Weekly
The Volatility Index held support of the bottom of its channel at 21.80, barely. There is support lower at 18 from the daily chart and 16.93 from the weekly. If it continues to hold there is resistance at the 200, 50 and then 100 day SMA's on the way to 28.40 on the daily chart. On the weekly chart adds resistance at 23.88 then 26.09 and 28. It looks to test the bottom of both channels again.

SPY 60 minute

SPY Daily

SPY Weekly
Although the SPY looks to be heading to a test of the 113.20 channel top, the 60 minute chart exhibited a bearish divergence between the price action and the MACD this week. It does look like it may resolve shortly and did not show up in the RSI so it is just a point of note right now. The daily chart printed an Inside Day today, a sign of indecision, with 111.19 as support and then 110.27 and 109.40 lower. It shows resistance at 112 and then 113.20. the weekly chart adds to the picture with a bullish move above the 20/50 week SMA cross above 110. It adds a resistance point higher at 114.67 and support lower at 106 and then 104.35. There is more room still to the upside.

IWM Daily

IWM Weekly
IWM also had an indecisive Inside Day, finishing below resistance at 64.33 with 64.91 as resistance higher. There is support below at 62.83-63 and then 61.84 from the rising 50 day and 20 day SMA's, respectively. It looks good to go higher still. The weekly chart shows the range between the SMA's and 58.68 holding up with this week's candle squeezed by the 20, 50 and 200 week SMA's. There is resistance higher on the weekly chart at 67.50, and support lower at 61 before testing 58.68. The MACD on the weekly looks to be turning and crossing adding to the bull case.

QQQQ Daily

QQQQ Weekly
The Q's also had an Inside Day but well above the 100/200 day SMA cross. There is support at the 45.18-.25 area and then 44.50 below that. Resistance comes first at 46.75 and then 47.10 followed by 47.60. The Q's crossed the 20 week SMA on the weekly chart which will now act as support. There is further support lower at 45.19 and 43.80. Resistance occurs at 46.60 and then 47.20 and 47.60 on the weekly chart. It must get through all those points to have a chance at changing the trend from flat to up. It is a bit troubling that the 20 Week SMA is about to cross down trough the 50 week SMA with the other SMA's flat. There is some room higher but keep an eye on that cross.

So next week looks like there may be a pullback or at least a rest for Gold and a rest or maybe a rise for the US Dollar Index. US Treasury Bonds are on support but look weak and headed lower. Although Oil looks strong it is at resistance and may need some time to work through it. Volatility seems to have found a bottom, although still weak, which should allow stocks to continue their move higher, towards a test of the top of the four month (or maybe one year) channel. Good luck next week!