Commentaries on the market
Comments as of close Thurs, 4/15/10
Trading Day by Day, copyright 2010
Comments as of close Thurs, 4/15/10
Had some surprisingly big weakness in most currencies and precious metals early last night (first part of european trading session) and this concerned me. Prices did come back OK later in european session and during US session but not great and quickly quite weak again this evening. This concerns me quite a bit and enough to feel may be best to go to sidelines in many of the financial markets (stocks, currencies and precious metals).
I don’t like to go against the lines and rules in this letter and have two reasons for this: first, over time the lines/rules tend to do better than my “feelings,” and second, when go against lines/rules and am wrong feel and look like an idiot. However, that being said am suddenly “feeling” very uncomfortable with idea of being long stocks, all currencies except Yen and US dollar and precious metals, as well as crude. I almost put out brief comments to this effect middle of day today but my record on intra day comments not good and thought would have plenty of time to convey my concerns tonight. Unfortunately had to run some errands this afternoon and so little late getting to letter and now prices quite weak again. So sorry to be late on this warning and may turn out to be a false one, but feels like something wrong here and so feel may be best to be very cautious for moment, especially with weekend coming up. This may be false alarm since basis lines nothing serious going on, but just don’t like action of last night, today and especially this evening. Possible that Greece crisis may flare up again over weekend, or something else may be going on, but don’t like action and usually better to be safe than sorry in this game since things can change so fast and dramatically.
Grain group tends to live in its own world and so if going to hold any longs would be those, but even there prices and SL’s now on recent highs and always have some short term downside risk when this case.
June S & P - Status - Bullish/mildly concurrent. Observations - Minor up day but consider that negative since with lines positive and acceleration to upside type day yesterday feel “should” have been up nicely. Basis lines and charts should go higher here but back to being very skeptical of upside in this market. Sentiment indicators are giving some big downside warning signs since way too much optimism about upside and complacency about downside risk (put/call ratios at long term bullish extremes, which is negative warning sign; plus some other sentiment indicators also excessively bullish like market letters too bullish, etc.). Should have known that me finally being willing to go long would be kiss of death for upside. Market down decently already in after market so any profits on suggested longs yesterday already gone. Don’t have anything negative on relative strength basis, but just don’t like “feel” of market here so prefer to be safe and go back to sidelines. Bottom line - Lines say can be long and this may be fine, but just don’t like it so prefer sidelines again.
June Bonds - Status - Bearish/Neutral (crosscurrent). Observations - On real strict line basis have a weak crosscurrent sell signal here now since trend marginally down, ML below zero and SL turned down slightly; however, trend really more sideways than down, ML on good up cycle and in position to sustain this for at least couple weeks and while SL turned down it has made higher low and high. Feel recent rally too strong if this market really were in a true sustained down move and so tend to doubt have much downside potential at moment, and could surprise on upside. Have to remember have had very bullish COT situation here for long time and recently even more so. On fundamental basis have big downside bias in this market since just seems crazy to believe will be good deal to loan money to US Govt for 30 years at 4.5 %, but logic rarely works in trading, especially on short to intermediate term basis. So prefer not to be/go short here since see too many real and potential positives and way market acting and way momentum line pattern looks (plus extremely bullish COT) if had to be in here at moment would have to be long, not short. Bottom line - Lines in between sidelines and short, prefer sidelines.
June Euro - Status - Neutral/Bearish (crosscurrent). Observations - A fairly big down day with prices sharply lower early in european session and then only came back slightly in US session. With SL and price on recent highs some downside pressure not surprising but was surprised by how easily sold off early in european session and how little came back from that sell off. Have a good rule which I tend to forget and that is when both price and SL at recent extremes high (or low) and do not have trend AND ML clearly up (or down) it is usually best to get out of any longs (or shorts if other direction) and this rule applied yesterday, unfortunately disregarded it and did not mention it; however, this rule a good one to keep in mind since tends to work more often than not. Am really conflicted here since trend now more sideways than down and close to turning up, so trend indecisive. And on momentum line pattern ML in solid up cycle with SL making nice higher lows/highs, but SL on recent highs and turning down. So overall line pattern is quite mixed. Have had idea were turning major trend up and would put in decent up move, but sudden sharp weakness last night and lack of come back today and so far tonight has me concerned with this scenario. Market has rallied on eurozone plan to offer Greece $40 billion in low rate credit line, but read today that various eurozone governments need to approve this and some are betting they will not. While comments have been that this would go through I’m always inclined to put more weight on those who put up their money and on that basis odds not so good this plan will go through. Personally believe Greece situation long way from being resolved since don’t see much willingness by various powers in Greece to accept need for austerity. Despite positive momentum line picture should price close back under 135.00 soon, especially tomorrow, chart would take on fairly negative look. So really tough call and with weekend coming prefer to be safe and go to sidelines. Pound has been doing better than other two in group past few days but hear Conservative candidate did not do so well in today’s debate and this may be putting downside pressure on prices tonight. Possible may reason for recent strength has been prospect of Conservative victory in early May elections and so any chance this may not occur could be fairly big short term negative. With trend still down there and both price and SL fairly high prefer to take profits and go to sidelines for moment. Bottom line - Lines say sidelines in all three in group and agree, at least for weekend.
June Yen - Status - Neutral (to Bearish)/crosscurrent. Observations - Close to getting a crosscurrent sell signal, but action of past few days (keeps coming back up from dips to 107.00 area) makes me very reluctant to be/go short. While trend clearly down and will remain so unless rallies very sharply, the momentum line pattern here is turning increasingly positive since ML in position for solid, sustained up cycle and SL starting to make higher lows/highs. Basis lines/rules too mixed to make case for position at moment and so sidelines probably best, but for whatever reason this markets acts like wants to go up, at least for while. Bottom line - Lines say sidelines and agree.
June Aus and Ca$ - Status - Bullish (to Neutral)/concurrent. Observations - Suggested stop level hit in C$ and close below 1.00 after two days above this psychological level leaves a minor “false” breakout above which can mark at least temporary top. Basis lines both these markets “should” be doing much better on upside here and fact are not is a downside warning sign. COT data has been, and still is, quite negative on these two markets and while as rule should ignore this when trends this positive, also this does carry more weight if start to get some surprisingly negative action. So while lines still justify longs see action as little too shaky past day or so and so prefer to go to sidelines in Au$ as well as Ca$. Bottom line - Lines still say can be long either/both these markets but stops hit in C$ and action too shaky in Au$ so slightly prefer going back to sidelines there as well (if want to give lines more chance to work could use 92.25 area for stops on any longs in Au$).
June Gold/May Silver - Status - Bullish/concurrent. Observations - Had some surprisingly weak action during early part of night session but then came back well only to be a little weak again this evening. On straight rule basis longs continue to be fully justified here since trends clearly up, ML’s in good up cycle (although this now weakening) and SL’s now down to +10 area so not over bought any longer. Plus choppy sideways in gold past four days now has look of bulls flag. Problem is suddenly have very uncomfortable feeling about long side of virtually all the financial markets (stocks, all currencies except yen and US dollar and precious metals). So tough call since don’t like to go with feelings over lines and rules, but did not like how low these two markets hit last night and really don’t like fact silver already back near those lows in evening market. So tough call but may be best to at least raise stops and make these stops little “harder.” Bottom line - Lines still say can be long either/both and this “should” be OK but uncomfortable with action of past day or so and so prefer to at least tighten stops to 1145.00 - 50.00 area in June Gold and 18.15 - 20 area in May Silver (with regular stops probably best now).
June Crude - Status - Bullish/mildly concurrent. Observations - Quiet unchanged day but see unchanged here as more negative than positive since sets up potential for big bearish divergence between price and SL (price near recent highs but SL long way from its recent high). Believe at least four of past Friday’s have been down days, for what it’s worth. Longer holds this area or lower next few days closer will come to turning momentum line pattern fairly negative so sideways will continue to be more negative than positive for while. Along with other “financial” markets suddenly have bad feeling about long side. Up trend is solid and as rule when this case should give any positive pattern good chance, but if down again tomorrow may be best to go to sidelines. So tough call since basis rules should stay long for at least another day or so but suddenly very uncomfortable with this plan. Bottom line - Lines say can be long and this “should” be Ok but prefer to be cautious and so would not stay long if should trade in 86.00 area or lower tomorrow, especially if does so late.
May Corn - Status - Neutral/indecisive. Observations - Third decent up day in row and this enough to turn trend sideways. Price and SL now on recent highs and so a little short term over bought, but see so much more upside potential than down prefer to stick with any anticipation longs. Close above 3.60 leaves two week “island” down below and this can mark significant bottoms. While on good three day rally see limited downside risk and so if not already long do not see anything wrong with initiating longs in this area. Bottom line - LInes say sidelines and this OK but prefer anticipation longs. Prefer to go without stops but can use just under 3.50 on close basis if feel need.
May Beans - Status - Bullish/concurrent. Observations - Solid up day and finally closed clearly above resistance of past few months in 9.70 - 75 area. Price and SL now on recent highs and so a little short term over bought, but prefer to stick with longs despite this. My rule for best combination for good sized, sustained up moves is when commercials have built up an historically very bullish net position while price was in down trend and then finally have trend turn up and that is case for all three in this complex now. So future unknown but feel should continue to be long and now would view any one to two and half days down as good opportunities to add to longs. Still see Oil has having little more solidly positive pattern than Meal, but Meal price doing much better recently. With prices and SL’s on recent highs in both beans and meal probably not good time to initiate new longs, but basis lines can make legitimate case to initiate new longs in Oil. Bottom line - Can be long any/all in complex; can make case to initiate new longs in Oil; prefer to go without stops in Beans and Meal since want to add to longs on next one to two and half day dips, but can use 39.25 - 40 area for stops in Oil, preferably not entered until after midday.
May Wheat - Status - Neutral/crosscurrent. Observations - Moderate up day and enough to close market on highs of past three weeks. Despite neutral pattern and slight down trend continue to prefer anticipation longs since see so much more upside potential than down. Do have rule that says usually best not to be/go long when price and SL on recent highs and trend down and that case now. Always risky to go against rules but will do so in this case since even if should dip for few days doubt will go far. Bottom line - Lines still say sidelines and this OK but continue to prefer anticipation longs.
July Cotton - Status - Neutral (to Bullish)/weak crosscurrent. Observations - Good up day and puts pattern close to going at least temporarily positive. Choppy market lately but even if does go bullish/concurrent soon still will not have a solidly positive pattern. Tough call since don’t like to pass on positive patterns, but will wait to see if actually does go positive before deciding whether to go with it. On a single low in SL at moment and always like to be/go long better when have at least one higher low on that line. Bottom line - LInes still say sidelines (although just marginally so now) and continue to agree.
Chick Goslin
