Commentaries on the market
Comments as of close Thurs, 4/1/10
Unusual day tomorrow since bunch of markets closed (including stock market) but stock futures open until about 45 minutes or so after the unemployment report and evidently bonds and currencies stay open few hours longer, but imagine will get very quiet after stock futures close. This may produce fast and exaggerated reactions to report. With stocks up today and bonds down this “should” indicate some kind of stronger economy report, but even if get this does not mean markets will react or end day as expected (after initial “knee jerk” reaction). Seeing a lot of downside warning signs in stocks now. Stocks have gone up for past year on basis economy would eventually improve. Lots of time when this happens and finally do get clear signs this economy is improving market will turn down for at least a while (the old buy the expectation, sell the reality deal).
June S & P - Status - Bullish/crosscurrent. Observations - Had first real clear negative relative strength today since NDX a lot weaker than Dow all day and Russell 2K slightly weaker than S & P. Add this to solid down cycle in ML on all four indexes and series of lower highs in SL, as well as potential for double (even triple) bearish divergences in all four and have the conditions that can easily lead to surprising down moves, both in size and time. While patterns technically positive they are only very marginally so. So continue to see bullish patterns as just too weak to justify risk of being long and once report out of way (whether bullish or bearish) see case for some against trend shorts (if want to be aggressive) as getting fairly good. Stock market closed tomorrow but futures will be open all night and until about 45 minutes after report. So lots of downside warning signs here now and so even if get some kind of bullish report may not produce much or lasting upside action. Did not get a next day signal in VIX since it was down .12 while Dow up, but Dow up 70 some points and VIX just barely down so see this as slight negative sign as well. Bottom line - Lines very marginally say can be long but see way too many negative warning signs to be long, and see nothing wrong with some against trend shorts either before or after report, and especially on lower close (but since this against trend it is aggressive trade).
June Bonds - Status - Neutral/Bearish (mildly crosscurrent). Observations - Market down all day but made lows early and slowly firmed rest of day and this a minor positive. Trend just marginally down and now so is momentum line pattern so case for shorts a little shaky now, at least for moment. Have major report tomorrow AM and being in bonds/notes for this always risky, and especially when lines turning more neutral. My rule that day before report action in bonds and stocks tends to indicate report gave a small indication of strong (economy) report a little more likely than a weak report. Would only take one good down day to turn SL down for a third lower high and if should see this would turn pattern clearly negative again. If not for report would suggest sticking with any shorts since so much easier to get solidly negative picture than reverse, but reports have not been kind to me recently so prefer to cover and go to sidelines. See big downside potential and if should turn down in earnest next day or so would still have lots of room on downside. Bottom line - Lines now say sidelines and have to agree with report coming tomorrow AM. However, nothing too wrong with taking risk and going into report short, just would not stay short on close much above 116.16 (in either June Bonds or Notes).
June Euro - Status - Neutral/crosscurrent. Observations -Second good up day and fourth good up day out of past five trading days. Have had this persistent strength in face of clear down trend and until yesterday a fairly negative line pattern. When this happens, and especially after a big four month decline it is a fairly good sign downside has run out of energy. Looking more and more like recent drop to 133.00 may have been a “final washout” type move that creates decent bottom. Had another sign of this today when Swiss sold off sharply midday while Euro held rock steady. Saw this action as a good sign the recent Greece debt crisis is at least temporarily over since showed money moving out of safety of Swiss back into Euro. So see good signs heading for a trend change to upside, or at least an end to downside pressure. However, just cannot make any kind of legitimate case for longs yet (in any of three - Euro, Swiss, Pound). SL and price both on week long up move and now both getting a little on high side and with trend still down not type of situation where should be going long. However, Swiss now within margin of error to consider trend up so if should get few days to week of sideways to moderate down in that market would set up decent buying situation. Bottom line - Lines now officially say sidelines and continue to agree (on all three european currencies).
June Yen - Status - Bearish/concurrent. Observations - Third moderate down day in row and close at new long term lows. SL turned down for a third lower high and this always negative, but did so just barely and this tempers the negativeness. Have monthly unemployment report tomorrow AM and this can produce big moves in currencies. Are now on a five hundred point dip in two weeks and this quite a big for short time period. Overall picture negative enough that see good additional downside potential, and maybe substantial, but with both price and SL on recent extreme lows and big report tomorrow AM now slightly prefer to take decent profits and go to sidelines for report, but this just a judgment call and could easily be wrong. Recent sell off so much that next rally should be limited in both time and distance, although even a day or two rally in this market can be decent sized. Bottom line - Lines still fully justify being short and this OK, but a little too short term oversold for me at moment so prefer to take profits and go to sidelines with idea of shorting again on next day or two up.
June Aus and Ca$ - Status - Bullish/mildly crosscurrent (but any more up tonight/tomorrow and will go mildly concurrent). Observations - Another moderate up day for these two and pattern still positive. May have been little too quick to suggest taking profits on longs here, but have same short term technical “problem” in these two as have in Silver and Crude (below) in that still on a single low in SL and always better when have at least a second higher low on that line. Sometimes just need to get SL to pause for day or two to correct this “problem” but will need to dip or go sideways for two, three days to get this now. With unemployment report tomorrow AM and pattern not quite solidly positive still see taking profits as little better bet than holding longs, but this just a judgment call and could easily be wrong. Up trend quite solid in both these and dollar index turning weak so could keep going. Bottom line - Lines still say can be long and see this as fine but still slightly prefer to take profits and go to sidelines temporarily.
June Gold/May Silver - Status - Bullish/concurrent. Observations - Solid up day for all three in group and also a very positive day from relative strength perspective since Plat and Silver again much stronger than Gold. Relative strength rule working well past few days and this a good sign for further upside. Worth noting that on chart both silver and platinum have made clear new highs for past several months while gold still has not which is another positive sign. Both gold and silver (and plat) now legitimately bullish/concurrent to upside so “official” buy signal so “should” have lots of upside potential from current levels. Only slight “problem” with longs here is both Silver and Plat currently on just a single low in SL and always better, more solid, when have some kind of higher low. This is like the difference in stability of standing on one leg vs two legs. This means should have a more solid buying situation after next several day dip in price and at least brief sideways or down in SL. Sometimes a better buying situation will come at a higher price and this could be one of those. So far holding back on being fully positioned has been wrong, but will continue to wait for next dip to go fully long. Dollar looking increasingly toppy and if dollar is turning trend down this should be very positive for precious metals as well. These markets closed tomorrow. Bottom line - Can be at least lightly long either/both these markets. Prefer going without stops for now since want to buy next dip, not sell on stops. Next one to two and half day dip should be excellent buying situation.
May Crude - Status - Bullish/concurrent. Observations - As expected had very good up day today in this market (before three day weekend). Really doubted would have fourth Friday in row down and did not. Only “problem” with longs here is same as in Silver (and Plat) in that on a single low in SL, so when finally do turn down some in SL and price this should actually set up a more solid buying situation. Pattern so solidly positive now prefer not to use stops now since want to buy/add on next one to two and half day dip. market closed tomorrow. Bottom line - Can be long without stops for moment since want to buy next dip, not sell on stop.
May Corn, Beans, Wheat - Status - Bearish (concurrent). Observations - Sideways type day but in Beans at least this negative since turns patterns more clearly negative. This group essentially off the board for me for time being since no interest in short side and cannot make any kind of case for long side. See Corn as best if want to play short side, but cannot suggest shorting at this level of price and SL. Bottom line - Lines say can be short any/all of these markets with corn best, prefer to stick to sideline
May Cotton - Status - Bullish/concurrent. Observations - Second good up day in row with close near highs of day today. Pattern turned “officially” bullish/concurrent to upside today and so could surprise on upside; however, unless pushes up sharply for next several days, which is possible, still believe not quite set up positively enough yet for a good sized, sustained up move. With trend so positive and pattern now bullish/concurrent should be able to give market a chance for at least next day or two, but would view sideways, and especially any down, next two, three days as much more negative than positive for short term and if should see that will probably have to have another dip in both price and SL before set up for sustained up move. So longer holds 81.50 area or lower Monday and Tuesday the better the case to take quick profit and wait for another buying situation, but am little more optimistic about short term upside after good up day today. Bottom line - Can be long with stops probably OK in 80.25 - 50 area, preferably not entered until at least after midday or so.
Chick Goslin
