Commentaries on the market
Comments as of close Thurs, 3/11/10
In writing these comments I try to follow a trading advice version of the Hippocratic Oath, first do no harm. Past few days have not done very good job of following this, will try to do better.
The deflation/inflation fight mentioned week or so ago (between deflation markets - bonds/notes, yen and dollar - and inflation markets - stocks, foreign currencies and precious metals) may be resolving itself in favor of the inflation markets, at least temporarily. This somewhat strange since have so many commodities selling off so much and persistently, but seems like story in stocks, bonds/notes, currencies and precious metals (plus crude and copper) is one primarily of liquidity and currency relative values at moment. Basis lines see window of opportunity for upside of currencies (downside in dollar) and precious metals next few days so could surprise on upside. This would be typical since past few days of sudden sharp downs in gold/silver have probably cleaned out a lot of spec longs (as well as past couple weeks of extreme downside pressure in european currencies).
Strange markets though with so many commodities essentially collapsing, which should be indicating economic weakness, yet this not having any impact on the other markets (stocks, bonds, currencies, etc.). Difficult markets to trade these days since short term moves so extreme and frequent and overall “big picture” so confusing.
Mar S & P - Status - Neutral (to Bullish)/mildly crosscurrent. Observations - Lines very marginally neutral at moment, but overall pattern still clearly much more positive than negative. Market tried to sell off some overnight and early, but pressure so strong to upside steadily regained losses and closed on a new long time high. Recent up move so strong and persistent when finally do get two/three down days should be good buying opportunity for at least short term (few day) move. Bottom line - Lines say sidelines and agree, but upside seems unstoppable.
June Bonds - Status - Bullish (to Neutral). Observations - Slight turn up in SL today produces a weak concurrent buy signal. Market briefly showed some upside energy midday today, but almost as quickly ran out of steam. All three lines up and COT has been very bullish for long time and ordinarily this really should lead to some decent upside action. However,action in this market recently has been poor and from fundamental view very difficult to see anything but very short term upside with deficits running in 1.5 trillion area for years to come (big supply of bonds for years ahead). Bottom line - Lines say can be/go lightly long and this OK but unenthusiastic and would not risk much (116.05 area?).
June Euro - Status - Neutral/Bearish (crosscurrent). Observations - Lines very marginally negative but too marginal for me to be short. Now on third day of a weak crosscurrent sell signal and this one has not worked so far, plus as rule this type of signal only lasts two to five days. Just need to close unchanged or better tomorrow and SL will turn back up for fourth clear higher low and this can lead to good up move, even when trend as negative as is here. Worth noting that during past three weeks Euro saw major downside selling to 134.50 area four times in seven days but each time came back to 136.00 level. Then next four days saw heavy selling push price down to mid 135.00 area, but each time quickly back up over 136.00. Now today selling only pushed it down to low 136.00 area before firming. This sign selling pressure losing energy and type of action that can produce a sudden, sharp up move. Just no interest in short side here despite strong up trend and see nothing wrong with some light against trend longs w/stops OK in 136.25 area. Worth noting Swiss SL turned up today giving it its fourth higher low already. Bottom line - Lines marginally say can be short, prefer sidelines or even some against trend longs.
June Yen - Status - Neutral/Bullish (crosscurrent). Observations - Very sloppy pattern and action here so prefer to stick to sidelines. SL turned up slightly today and this might produce some up, but too mixed/sloppy for me so prefer sidelines. Bottom line - Lines in between sidelines and marginally bullish, prefer sidelines.
June Aus and Can$ - Status - Neutral (to Bullish)/crosscurrent. Observations - Lines say sidelines and this fine, but see overall patterns as much more positive than negative. See this Can$ pattern as little more positive than Au$ at moment, but these two seem to go back and forth between one being better than other. Continue to have this big triple top on chart and these tend to be broken decisively. Price has been grinding higher in both past week and this also tends to eventually lead to solid up move. Bottom line - Lines say sidelines and this OK but see nothing too wrong with some light anticipation longs with area of today’s lows probably OK for stops.
Apr Gold & Silver - Status - Neutral (to Bullish)/crosscurrent. Observations - Lines say sidelines and this OK, but still see much more upside potential than down and so if had to be in still prefer longs to sidelines or shorts. Tough to stick with longs here past few days since keep getting these short term, sharp selloffs (like had yesterday and early today), but market does keep coming back up and this positive. If by some chance do see currencies push decently higher next few days (dollar decently lower), which is very possible based on action and lines, maybe this will finally produce a decisive up move in precious metals. Most positive thing about today in pm’s was persistent very positive relative strength since Plat strongest all day, Silver next and then Gold. Also, have the same positive relative strength in the line patterns with Plat best, then Silver and finally Gold. Bottom line - LInes say sidelines, still prefer longs but tough to place stops (area of today’s lows?, especially if see this area after midday tomorrow).
Apr Crude - Status - Neutral (to Bullish)/crosscurrent. Observations - Line pattern here very similar to that of precious metals, stock indexes and currencies and so outcome will probably be same. Pressure clearly to upside since sell offs brief and keeps ending up higher. When have this type of line pattern where ML rolls over to down cycle and get bearish divergence between price and SL, yet price does not go down much or for long it tends to be a sign that market just wants to go higher and sooner rather than later will do so. Bottom line - Lines say sidelines and this fine, but see upside odds and potential as better than downside.
May Corn, Beans and Wheat - all Bearish/concurrent. Observations - Have had very negative line patterns here for past week and while corn and wheat have been pushing lower beans were holding up, until today when beans collapsed. Weird action in Beans late yesterday when rallied very sharply, but this turned out to be what I call “a backing up to build up ramming speed” move. Obviously should have just gone with these clear line patterns week or so ago and just stubbornly stuck with them. Unfortunately I never have much enthusiasm for short side of grains, and especially when COT data so bullish, but lines have worked very well here past week or so and probably will continue to do so. With lines so negative now next two day rallies should be good shorting opportunity, for at least quick trades, since longs now much be feeling very badly stuck and anxious to use any rally to get out. Will take quite a bit of sideways to up to turn these pictures even potentially positive now. Even Bean Oil which had been positive now short to intermediate term negative. Bottom line - Lines say can be short any/all three and cannot disagree.
May Cotton - Status - Neutral/crosscurrent. Observations - Trend solidly up but ML just as solidly down and so market solidly crosscurrent. Strange market here past month or so since first had incredibly persistent and strong up move for several weeks and now getting exact opposite on downside. Usually when up trend this strong and recent up move so strong and persistent the first dip tends to be good buying opportunity, but ML down cycle so solid now and SL has gone so low doubt next rally will go far or last long. Bottom line - Lines say sidelines and agree.
Chick Goslin
