Commentaries on the market
Comments as of close Fri, 3/19/10
I wrote comments for Thursday night but somehow did not get them sent out. Other than pointing out the clear negative relative strength in precious metals group not much was worthwhile in comments so did not miss much. On Friday had similar negative relative strength in stock group, will have to see if this negative warning sign as effective as precious metals sign was on Thursday.
June S & P - Status - Bullish/Neutral (marginally concurrent). Observations - Pattern mildly positive but overall very mixed picture here. With market short and intermediate term overbought, action on Friday poor and fairly negative strength on Friday (Russell 2K and NDX weaker than S & P and Dow) see sidelines as best, but could surprise on downside (negative relative strength a short term negative warning sign). Bottom line - Lines marginally positive but prefer sidelines.
June Bonds/Notes - Status - Neutral (to Bullish)/crosscurrent. Observations - Lines now little more neutral than positive. I don’t have good feel for this market, never have, but overall picture still more positive than negative and when this case odds always favor higher prices. Bottom line - Lines say sidelines and agree, but odds favor higher.
June Euro - Status - Bearish/Neutral (concurrent). Observations - Second big down day in row essentially turns pattern negative and concurrent to downside. Lines justify shorts, but am not quite convinced starting a new leg to downside. Pattern is Swiss still solidly neutral/crosscurrent and this lessens negative picture of Euro. So would not go short here and longer holds around unchanged or higher tonight/tomorrow the better the case to take quick profits on any shorts from past couple of days. Pound now on crosscurrent sell signal and even when trend as clear as is to downside now this type of signal only tends to last two to five days. As rule when ML on solid up cycle (as is case now in Pound) usually don’t get more than two, three days down and now have had two, so any more down tomorrow will be pushing it on short term basis (so prefer to take profits on any shorts there also. Bottom line - LInes in between sidelines and shorts in Euro, but will go clearly negative after tomorrow. Shorts OK but now prefer to cover and go to sidelines. Lines say sidelines in Swiss and agree. Lines say can be short Pound and this OK but slightly prefer to take profits and go to sidelines (same with any longs in Dollar Index).
June Yen - Status - Neutral. Observations - Lines about dead neutral and this indicates sidelines probably best and have to agree. This market has been pain to trade past week or two since just stuck in sideways pattern. Weekly chart still has potentially quite positive look, but may take another week or two of choppy, sideways to turn that potential to reality. Bottom line - Lines say sidelines and now have to agree.
June Aus and Can$ - Status - Bullish (to Neutral)/marginally concurrent. Observations - Lines still justify being long and since bullish/concurrent and on two day dip can make OK case to initiate new longs. However, positive patterns are tenuous and so would not stay long if should close lower for third day in row, or if down much tonight or tomorrow. Bottom line - Can be/go long either/both but need to put any new or existing longs on fairly strict probation (meaning stops OK in 9025 - 50 and 98.00 - 98.25 areas respectively, especially if see these levels anytime after Europe opening 2AM NY/eastern time).
June Gold/May Silver - Status - Neutral (to Bearish)/weak crosscurrent. Observations - One worthwhile thing did point out in the unsent Thursday night comments was the very clear negative relative strength had in this group on Thursday. Gold was up but both silver and platinum were decently down. Since Plat and Silver have strong tendency to lead Gold this was a clear negative warning sign. Add in the potentially quite negative line pattern in Gold and had some solid negative warning signs on Thursday’s close. Rarely get such a good example of the worth of relative strength in this group, but this rule does tend to work and so important to pay attention to what silver and plat are doing if trading gold, and vice versa. Patterns now neutral but unless prices reverse quickly and decently to upside over next couple days the patterns will turn legitimately negative in gold and silver (up trend in plat too strong for that one to go negative any time soon). When have as bearish a COT situation as currently have in Gold and then get clearly negative line pattern (third lower high in SL and ML in position for sustained down cycle) this creates some serious short term downside risk. Weekly charts remain negative on all three precious metals, at least for moment, and this adds to downside risk. So would not be/go long and see no problem with some shorts.
Bottom line - LInes say sidelines but can make decent case for anticipation shorts in gold and/or silver. Stops for now need to be above 1122.00 in June Gold and in 1730.00 - 35.00 area in May Silver.
May Crude - Status - Neutral/crosscurrent. Observations - Second big down Friday in a row and this unusual since crude usually firm on Friday’s due to always present event risk over weekends. Week ago a weak Friday produced a weak Monday, will see if get this again and believe will. SL turned down for a third lower high and ML in position for sustained down cycle. So only positive left here is moderate up trend and this may not be enough to prevent good sized down move. COT has been and still is extremely bearish. Rule is can/should ignore this as long as line situation positive. While trend still up, rest of picture now quite negative, add in very bearish COT and have combination that can produce surprisingly big down move. Never have much, or any, enthusiasm for short side of this market due to always present event risk (I was trading when Iraq invaded Kuwait over a weekend and remember very well how Crude opened more than $20 higher on Monday. At the time did not have mini contract so that was a $20,000 a contract gap higher. Tend to remember events like that.) Bottom line - LInes say sidelines and agree, but can make decent case for anticipation shorts w/stops probably OK a little above 82.00 basis May.
May Corn, Beans, Wheat - Status - Neutral/crosscurrent. Observations - Lines say sidelines and this OK, but am growing increasingly bullish on this group, especially beans. A few days of choppy, sideways or small down would create potentially very positive line patterns, but market may not cooperate. COT data has been very bullish on all in this group for long time and when this case should be alert to positive warning signs, now getting number of these (line patterns turning potentially very positive, not much down when patterns where clearly negative, action persistently positive - down early, firm late). So see anticipation longs in any/all in this group as justified now, but only if prepared to ride through some possible sideways to slight down next few days. See Beans as best to buy, but all in group should do well if can hold this area next few days and then head higher (or if head higher now). Feel this group has had its chance for significant downside and passed on it, now should try the upside. See upside potential as significant. If had to put on one trade that had to hold for next month or longer it would be long Beans. Bottom line - Lines say sidelines and this OK,but prefer anticipation longs in any/all in group with Beans first preference but like corn and wheat as well. Prefer going without stops for moment, but can use 3.65, 9.45 and 4.75 respectively (May corn, beans, wheat) as fail safe stops, preferably not entered until around midday Monday.
May Cotton - Status - Bullish/crosscurrent. Observations - On sixth day of weak crosscurrent buy signal and these tend to last no more than five days so pushing it here on upside. If should get week or so of choppy, lower would set up excellent buy situation, but market may not cooperate. Prefer sidelines at moment due to strong crosscurrent pattern and week long rally, but on intermediate and longer term basis still see big upside potential. Bottom line - Lines say can be long and this OK but prefer sidelines for moment.
Chick Goslin
