Commentaries on the market
Comments as of close Tues, 4/27/10
Trading Day by Day, copyright 2010
Comments as of close Tues, 4/27/10
Continuing the monthly fund drive: Anyone who has “donated” in the past month or so will receive the daily letter via e-mail right sent after finish writing it; however, starting tonight I will not post the letter to the web site until “later” (meaning anywhere from several hours later up to early the next morning). So it will be like the exchanges do with their quotes, letter still will be free but only on a delayed basis, while for those who pay/donate letter will be sent out as soon as ready (i.e., in real time).
Something sure spooked markets today and while had some signs yesterday that this was coming did not expect this much general weakness so quickly. See size of today’s downs and pervasiveness of weakness as a clear downside warning sign for virtually all markets (except US dollar, interest rate markets and maybe yen). A few commodity markets that have very positive patterns and tend to move independently of the others could/should continue to push generally higher (beans, meal, cotton) but even there would be more cautious of long side (meaning slower than otherwise would be about getting back long). So would be very cautious of long side of any market except dollar, bonds/notes and yen (and possibly/probably beans, meal, cotton) and see this as time where if want to be little aggressive on shorting few of the other markets (euro, swiss, pound, maybe Au and C$, and stocks) could pay off quite well.
June S & P - Status - Neutral/crosscurrent. Observations -Big down day and while this does qualify as an against trend down spike, this one did not have the obvious news event cause that similar down spike week or so ago did, and so less likely to be an aberration and more likely to mark beginning of a continuation move. I had decent feeling that yesterday’s action marked a significant top in stocks and this feeling much stronger after today’s big down. Cannot make any kind of legitimate case for shorts here due to strong up trend, but momentum line patterns now negative (especially in Dow and S & P) and are the type that can lead to decent down moves even when trend clearly up. The next day down signal from VIX yesterday worked very well today. VIX was up a huge 5.34 today and even with big down day this much more than would expect and see this as sign someone suddenly very fearful of something. VIX has been pushing higher for several days now and see no reason on surface for this and so possible there is something quite negative going on under surface. If downside good from here, and believe could very well be and for quite a bit in both time and distance, should not see prices back up anywhere near yesterday’s closing levels. So if want to be aggressive and be or go against trend short here see this as worth risk. Bottom line - Lines say sidelines and this may be best, but if want to be aggressive see some against trend shorts as worth risk (stops need to be at least above 1200.00 area, preferably not entered until at least after midday tomorrow, and comparable areas in other indexes).
June Bonds/Notes - Status - Bullish (to Neutral)/mildly concurrent, but in position to strengthen. Observations - Finally had some positive action here today on good up day. Mentioned yesterday felt would need some help from stock market weakness to get going on upside in bonds/notes and saw signs were going to get this and definitely did. While stocks have been coming back from every dip for over a year, see signs this dip may be different and feel may have made significant top in stock market now. Regardless, should always give most weight to current chart/line picture in each market and less to what other markets are doing and now patterns in both bonds and notes fully justify being and going long. Need to keep in mind that have had an extremely bullish COT situation in both these markets for very long time and my rule for best combination for good sized/sustained up moves is when have this and then trend/momentum finally turns clearly negative, and that’s case here now. If upside good now, and should be, then really should not see price back to yesterday’s closing levels or even very close to this so not too much risk and lots of upside potential. Worth noting SL’s in both turned up for third higher lows and with everything else positive this adds to at least near term bullishness. Bottom line - Can be/go long either/both with stops for tomorrow OK in area of yesterday’s closes or little higher (116 3/4 to 117.00 area in Notes and 117.00 to 117 16/32 in Bonds).
June Euro - Status - Bearish/concurrent. Observations - Big down day in all three european currencies and obviously made mistake in suggesting wait another day before shorting; however, once weakness evident last night/today could have made good case to get short, if not already. Patterns now quite negative on all three european currencies and negative enough that see going short even in this recent low area worth risk. ML in Pound just turning down and in position for sustained down cycle. If look at chart will see last two times this happened had over ten cent down moves. If that should happen this time as well would see price down to 145.00 or lower levels so plenty of room on downside even after today’s big down. Bottom line - Can be/go short any/all three european currencies. Stops have to be generous for time being with at least a little above 133.00, 93.00 and in 153.75 - 54.00 areas respectively, preferably not entered until midday or little later tomorrow.
June Yen - Status - Neutral/crosscurrent. Observations - Big up day with turned pattern back to neutral. Have been expecting some good up here for several days and finally got it today. Basis short term picture “should” see some more upside for at least few days. Trend so solid to downside difficult to expect trend change to upside anytime soon, but if go into some type of big general sell off yen could surprise to upside since it has become a “flight to quality” market past few years. Also have very bullish COT situation here and this can help if get decent upside momentum going. Bottom line - Lines say sidelines and agree.
June Aus and Ca$ - Status - Neutral/crosscurrent. Observations - Big down day and this keeps pattern neutral, but this down spike has look and feel of a continuation spike (to downside). See it as very negative that prices in both these markets now back on lows of week ago and see this as sign headed for trend reversal to downside. Have to keep in mind have had extremely negative COT situation in both these markets for long time and when this case have to give any legitimate signs of trend change more weight. Momentum line pattern also now quite negative and so everything negative here now except trend and this shows some signs of weakening as well. Bottom line - lines still say sidelines and this probably still best, but if want to be aggressive see some against trend, anticipation shorts as worth risk. Stops would need to be in 91.75 - 92.00 and 99.50 - 75 areas for tomorrow, preferably not entered until at least after midday and preferably not until late in day/or close.
June Gold/July Silver - Status - Bullish (to Neutral)/crosscurrent. Observations - Very mixed day in this group with gold quite strong but silver and especially platinum very weak. Cannot remember when had this extreme an example of negative relative strength in this group. Since plat and silver have strong tendency to lead gold have to see today’s action as quite negative for all in group. Only explanation can come up with this extreme divergence between members of this group is someone must see something potentially quite negative for all markets since buying only gold has to be a fear deal, no idea of what object of this fear might be though. While don’t like missing upside in this group just see pattern as too marginally positive to be long here on recent highs and see relative strength as much too negative as well. Bottom line -Lines still say (although just marginally now) can be long gold and/or silver and this may be OK but prefer sidelines for time being.
June Crude - Status - Neutral/crosscurrent. Observations - Very mixed pattern here and so sidelines looks best for while longer. Never have any interest in shorting this market due to always present extreme event risk on upside (will never forget when Iraq invaded Kuwait over weekend and crude opened twenty dollars higher - ten thousand per contract, did not have mini’s then) and this type of event that can almost put you out of business overnight. However, momentum line pattern now quite negative and recent action also negative and so see odds here as favoring downside. Bottom line - Lines say sidelines and agree.
July Corn - Status - Bearish (to Neutral)/concurrent. Observations - Decent down day with close on new long term lows. Pattern now going bearish/concurrent to downside and whenever this happens can fully justify at least light shorts. Not much enthusiasm for short side of any in grain group, but this a slight but clear downside breakout on chart and with line pattern turning clearly negative as well see no problem with some shorts here, especially since risk not too much since should be able to use fairly close stops. Bottom line - Can be/go short with stops probably OK a little above 3.60 area, preferably not entered until late in day/on close.
May/July Beans - Status - Bullish/concurrent. Observations - Fairly big down day with close on lows of day, but pattern still positive. Was concerned yesterday that beans and meal could not hold up with others in group so weak and saw this today. However, this an example of why so important to focus on being long the strongest in this group since had plenty of time to get out of longs at good price in this market while if long wheat or corn did not have much downside warning or time to sell. Have now had day and half down in beans and so any further down tomorrow “should” set up decent price/time to go back long. With markets in general so weak today prefer to be little slower going back long here than otherwise would be, so will stick to sidelines for another day. However, basis rules any price lower tomorrow would qualify as attractive time/price to initiate new longs in both beans and meal. Not very interested in short side of this group since don’t see that much downside potential, but if markets as whole going down the weaker ones in grain group could join them, at least for while. Can now make at least OK case for some anticipation shorts in Bean Oil. Trend and ML both on verge of turning down and will on any further down tomorrow. SL pattern on verge of going decently negative as well. Should be able to use fairly close stop and so not too much risk and if going into down period could surprise on downside. Bottom line- Lines still say can be (and go) long beans and/or meal and this OK but prefer to stick to sidelines for another day. Lines say sidelines in Bean Oil but see some light anticipation shorts as justified with stops OK a little above 40.00, would not enter until after midday or so.
July Wheat - Status - Neutral (to Bearish)/crosscurrent. Observations - Quiet, unchanged day and see this as more positive than negative after yesterday’s big down and today’s weakness in corn and beans. Just don’t have any interest in short side of this market and since cannot make good enough case for longs at moment prefer just to stick to sidelines for time being. Bottom line - Lines say sidelines and agree.
July Cotton - Status - Bullish/concurrent. Observations - Moderate down day but nothing excessive and not enough to change continuing clear bullish/concurrent pattern. Now have had a day and half down and so any further down tomorrow will create a buying opportunity. With markets in general so weak prefer to be a little slower than otherwise would be in going back long here. So, nothing at all wrong with still being long and/or initiating new longs on any further down, but prefer to stick to sidelines for another day. Bottom line - Lines say can be/go long and this OK but will stick to sidelines for another day (although any price in low 84.00 area would be “attractive” price).
Chick Goslin
