Commentaries on the market
Comments as of close Friday, 4/23/10
Trading Day by Day, copyright 2010
Comments as of close Fri, 4/23/10
In the “old days” (up until 1980 or so) markets were open from Monday AM to Friday PM and only open about a third or quarter of each day. This meant had lots of time every day to “read” markets while they were closed (i.e.,not moving). Today situation very different in that markets start trading Sunday afternoon and essentially don’t stop until Friday afternoon (take breaks of an hour or several hours every afternoon depending on market). This means it’s very difficult to take a calm, relaxed look at technical pictures while markets not moving since they essentially are always moving. This is probably the big difference in trading today versus twenty, thirty days ago.
This constant movement of markets during the week makes it much easier to get “off track” during week and had this happen to me in some of the financial markets this past week (especially european currencies late in week). So will take this two day break to take a more detailed look/read (below).
June S & P - Status - Bullish/Neutral (crosscurrent). Observations - Have two different pictures from the four stock indexes at moment with Dow and S & P neutral to marginally positive but NDX and Russell 2K much more clearly positive. The charts on NDX and Russell 2K both have quite positive pictures. Since NDX and Russell 2K tend to lead have to see this as positive for all four, but would not take too much down next day or two to turn Dow and S & P patterns too short term negative to justify longs. Have been way too cautious/negative on upside potential of stock market for way too long, but will stick to sidelines for at least another day. DId get a fairly good next day down signal from VIX on Friday since despite solid up day on all four indexes VIX was actually up marginally (when would expect it to be down decently). This indicator has not worked past several times has given signals though. So unless start to see some persistent and decent sized downside action soon here patterns such that may have to finally give up and go long. Bottom line - Lines in between sidelines and longs in Dow and S & P and so will stick to sidelines (patterns positive in NDX and Russell and so indicate longs justified there).
June Bonds/Notes - Status - Bullish/Neutral (crosscurrent). Observations - Second decent down day in row for these two and so would not want to see another since that would be too much downside pressure. Pictures here now turning more neutral than positive so case for longs getting quite shaky. On weekly charts short term still looks OK for upside but need to see some continued upside action or pictures could turn quite negative in week or so. If by some chance should see prices in these two move down under 115.00, and especially under 114.00, longer term charts would become very negative and indicate headed for substantially lower prices (much higher interest rates). The short term eurodollar market has been stuck in sideways pattern for almost a year and half as Fed has kept rates extremely low, but daily chart of that market suddenly showing some potential negatives. Had a big downside weekly reversal in that market this week and was the kind that tends to be a big downside warning sign since made just a slightly higher high but closed quite a bit lower (this more decisive reversal than when get lot higher during week and then close just slightly lower - like the downside weekly reversal had in S & P couple weeks ago which did not signal any significant downside). So am increasingly concerned about upside chances in this market and downside risk. Bottom line - LInes in between sidelines and longs in these two and so should put any remaining longs on fairly strict probation (either up or out Sunday night/Monday, and longer hold unchanged area or lower the better the case for sidelines.
June Euro - Status - Bearish (to Neutral)/moderately concurrent. Observations - Fairly big upside reversals in Euro and Swiss on Friday and this makes call here tough. Have gotten a little out of rhythm on these two markets past couple days and this always increases difficulty in reading market. Basis lines shorts justified, but if look at chart has really not paid to be/go short when SL’s on recent lows (or be/go long when opposite the case) and SL’s in both at recent lows now. Difficulty recently here probably due to fast whip saws in price on steadily changing Greece bailout news, which supposedly suddenly a little bullish again. Have always found when get temporarily “off” on reading a market tends to be best just to go to sidelines for day or so and so will do that here. However, would view sideways or just little up next day or so as much more negative than positive since would alleviate short term oversold condition while maintaining bearish picture. Picture in Pound a little different than other two and potentially quite negative since do have slight third lower high on SL just as ML rolling over to down cycle (and in position to sustain down cycle for some time), but at same time SL also making potential big third higher low and down trend weakening rapidly. So tough call there as well with next hundred point higher/lower close probably deciding the near to intermediate term outcome. If had to be in Pound here would still prefer short side, but too close a call so here as well prefer sidelines for a day or so, although close in 153.25 or lower tomorrow and would be able to fully justify shorts. COT data still quite bullish on Euro and Pound and to lesser extent Swiss. Bottom line- Lines say can be (and go) short any/all three european currencies and this may be fine but slightly prefer sidelines for at least a while Sunday night and Monday as little out of synch on these three at moment.
June Yen - Status - Bearish/crosscurrent. Observations - Solid down day and this brought price back down close to recent long term lows. Have missed a very good down move on this crosscurrent sell signal but this now getting a little “old” since pattern still solidly crosscurrent. Weekly chart/line pattern here has very ominous look for downside and if price holds this area, or especially any lower, next week or two weekly pattern will turn very negative. Problem is just don’t see daily line pattern as negative enough to push short side. COT data quite bullish but rule is can/should ignore this when trend down and that clearly case. So missed good down move here past week but pattern too mixed/too potentially short term positive to make case to initiate shorts here. Bottom line - Lines say can be short and this good so far but will stick to sidelines.
June Aus and Ca$ - Status - Neutral (to Bullish)/crosscurrent. Observations - Unchanged day on Friday turned patterns in both these markets (temporarily?) back to neutral, but both came back quite well from some fairly big early weakness and this always a positive sign, especially when trends clearly up. Weekly charts here are little mixed at moment as well, but as with the daily charts they are also overall more positive than negative and in position to become quite positive over next few weeks. These two have been the most positive/bullish of the currencies for some time and so should give the upside benefit of doubt as long as up trends remain clear. COT data remains very negative for both, but rule is can/should ignore this as long as up trends clear. So tough call here at moment but past three days of sideways in C$ has to be seen as more positive than negative and late strength in both on Friday also a positive. Bottom line - LInes say sidelines and continue to agree, but longer prices hold above 92.50 and 100.30 levels, and especially if close above those levels, the better the case for some anticipation longs.
June Gold/July Silver - Status - Bullish (to Neutral)/crosscurrent. Observations - (Switching to July Silver.) Good up day on Friday after some early weakness and this came at key time. The weekly charts on both these markets are solidly bullish/concurrent and due to this should give long side more chance than otherwise would. Are on second day of crosscurrent buy signals here and these only tend to last two to five days, but sometimes can have a crosscurrent pattern turn to concurrent and this may happen here with weekly patterns so positive. COT data still bearish on Gold but little less so this week on 4K add to long side, which is always positive (commercials going long any amount since they usually don’t). In silver on net basis COT data negative but have always found the number of commercial longs in silver to be key and whenever this level above 28K and trend up it tends to be good positive. At moment commercials long a little more than 32K silver and this positive. A close above 1160.00 in June Gold and above 18.40 in July Silver would be quite positive on chart and not far from these levels in both after Friday’s up. From bullish perspective what do not want to see would be turn down in SL next couple days. Would need closes below 1140.00 and 17.87 on Monday for this to happen. Weekly line patterns are type where could see extended up move (couple months of upside pressure) and so see much more upside potential than down. With this being case feel can be little more aggressive on long side than have been suggesting. Possible Monday could be an up or out type day since solid up would turn picture quite positive and solid down would indicate more choppiness ahead with possible decent down near term. Had a negative relative strength day on Friday due to Gold being strongest with Platinum weakest, but on big picture Plat much stronger than Gold and this negates one day of relative weakness. Bottom line - Can be (and go?) long with stops in 1140.00 and 17.90 (July) on late in day/close basis probably OK.
June Crude - Status - Bullish (to Neutral)/crosscurrent. Observations - Very good up day on Friday (for a change) with close on highs of day and past week. Had an upside reversal week since made new recent lows and closed higher and this always positive and especially when trend clearly up. Price went just under 83.00 on lows which was exactly the suggested stop area. Suggested using regular stops but this a good example of why usually prefer not to enter stops until at least after midday. If still long see giving these at least another day right idea and if not long see picture as little more positive than did in Thursday’s letter. The pictures of both products clearly more positive than crude and see this as an upside warning sign. What is happening at moment in the products tends to be better indicator of current demand than crude and so find products tend to lead crude. Have been little cautious of long side here past week due to sloppy action and line pattern, but have seen number of times in this complex where a sloppy crosscurrent buy signal just keeps going and ends up turning into a good concurrent situation and this may end up being one of those times. Have found that gasoline tends to lead this complex and in that market price now back up on long term highs and since hitting this high for third times odds good will break through to new highs, which would be clear positive sign. So would view any more upside next couple days as quite positive sign. On negative side what would not want to see would be quick turn down in SL’s, but would need good sized down day Monday to get this (82.60 in June Crude). So see being little more aggressive on long side here as worth risk, but would not want to see too much down on Monday. Bottom line - Can be (and go?) long any/all in complex with RBOB gasoline probably having best upside potential. Stops tough to place since don’t want to risk down to the turn down points in SL so using Thursday closing areas probably good enough (entered anytime after midday)
July Corn - Status - Neutral/crosscurrent. Observations - Another sudden big down day for this market on Friday and these seem to come every time I mention market may be positive enough for some anticipation against trend longs. This one remains the weakest/least positive of group and so least attractive for any longs. Once clearly established relative strength in this group tends to last for long time and this rule has definitely been the case past month or so since it has been clear for some time that corn is weakest/least positive of group. Down day on Friday in all in this group may have been due to it being option expiration day, but down is down regardless and this one quite weak Friday and this at least a small short term downside warning for group as whole. Still see much more upside potential than down in this and others in group (due to long standing very bullish COT situations) and so prefer to continue to pass on any sell signals in group. Weekly pattern in Corn also least positive of group. Bottom line -Lines say sidelines and agree.
May/July Beans - Status - Bullish/concurrent. Observations - Small down day Friday but overdue for some down and this not much. Price and SL a little on high side and always have at least some downside vulnerability when this the case, but as rule when in this solid a bullish/concurrent pattern should stick with longs despite this. Have had a very bullish COT situation for long time in this market (a little less so now but this normal after good up move) and when this case and trend finally turns up solidly, as has done here, as rule tend to get good sized, sustained up moves and “sustained” tends to mean several months. Weekly pattern here is Neutral (to Bullish) but in position to become progressively more bullish over next few weeks. Pattern in Meal also continues to be clearly bullish/concurrent and so also fully justifies being long. Friday one down day there and so another day or so down and will be able to justify initiating new longs. Finally had a decent up day in Oil on Friday and pattern back to marginally positive. I always prefer to go primarily with Beans when positioned in this complex and then add longs in the better of the two products. Meal still much more positive than Oil, but can make some case for light longs in Oil after Friday (with stops in area of Thursday’s close - 39.50 - on late in day/close basis). Bottom line- Can be long Beans and/or Meal (and maybe little Oil as well now). Continue to see little need for stops in Beans and Meal since still in buy dips mode, not sell on stops mode.
July Wheat - Status - Bullish (to Neutral)/marginally concurrent. Observations - Small down day on Friday but this may have been due to it being option expiration day and nothing overly negative. Trend still a little indecisive but price is above ten week moving average line for first time in many months and close enough to continue to consider trend up. Momentum line pattern remains positive with ML still on good up cycle and SL still making higher lows/highs. Price and SL a little on high side and with trend only marginally up, at best, probably not best place/time to initiate new longs, although existing longs from lower still justified. Due to long standing extremely bullish COT situation continue to justify giving longs here plenty of chance, especially with trend now starting to turn up. Weekly charts here nicely positive and in position to become even more so and so supports giving longs good chance. Bottom line- Can be long with stops probably OK now in 4.90 area, preferably not entered until at least after midday.
July Cotton - Status - Bullish (concurrent). Observations - Pattern remains solidly bullish/concurrent to upside and so continues to fully justify being long. Did not give any more down Friday for good place to initiate new longs, but anytime pattern as clearly positive as this one is can add new longs on almost any dip. Weekly pattern is positive as well and while on a crosscurrent buy at moment, it’s in position to go nicely concurrent in another week or two. Bottom line - Can be long with stops probably not necessary but can use late in day/close under 84.00 area if feel need.
Chick Goslin
