Was today's (Friday's) world-market rally serious and sustainable, or simply a knee-jerk reaction to Japan's surprise NIRP (negative interest rate policy) announcement last night (including some shorter-term short-covering action) and "end-of-month window dressing" by fund managers?
Perhaps the following update to my last post will provide some further insight into that question, as I review a variety of markets.
Decorating the tree
Friday, January 29, 2016
Thursday, January 28, 2016
Thurs. Jan. 28/16: Possible Bull Trap Today
*SEE UPDATES BELOW...
As at the time of writing this post (9:45 am ET), the Daily Heikin Ashi candles on the E-mini Futures Indices (YM, ES, NQ, TF & NKD) are hinting that today's rally may be a bull trap...I'll post an update after today's close.
*UPDATE (after Thursday's close):
Here's how these E-mini Futures Indices closed today. The Daily Heikin Ashi candle chartgrid below shows a lack of conviction or strength, at this time, on the part of buyers. In months past, we'd normally see a V-shaped bounce on this type of candle chart, with a decent rally following...but such is not the case now.
A look at the Weekly Heikin Ashi Candle chartgrid below shows, that on a weekly basis, no reversal pattern is yet seen.
I'll post another update after tomorrow's close to see how this week's candle closes.
I last wrote about the SPX:VIX ratio in my post of January 13th. The Monthly ratio chart below of SPX:VIX shows that price bounced a bit since then, and is now stuck in, what I've called the "Uncommitted Zone."
Until we see a move (with conviction) above (which stays above) the 100 Bull/Bear Line-in-the-Sand level, we'll continue to see whippy, volatile moves, which lack direction...or even see the next major plunge in the SPX and equities, in general. The Momentum indicator is still below zero on this timeframe...I'll need to see it pop above (and stay above) zero on any rally to confirm buyer conviction.
I'll post another update after tomorrow's close to see how this month's candle closes.
***N.B. This stunning announcement Thursday evening by the Bank of Japan to cut interest rates into negative territory immediately sent world markets and currencies roiling overnight...Japan's Nikkei Index made several harrowing round-trip spikes, totaling approximately 2,180 points! I'll post more on the effects on markets after Friday's close.
*UPDATE (as of Friday @ 10:30 am ET):
World markets rallied overnight and North American equities continue the bounce, as noted below (more later)...
Source: www.indexq.org
*N.B. See my next UPDATE at this link.
As at the time of writing this post (9:45 am ET), the Daily Heikin Ashi candles on the E-mini Futures Indices (YM, ES, NQ, TF & NKD) are hinting that today's rally may be a bull trap...I'll post an update after today's close.
*UPDATE (after Thursday's close):
Here's how these E-mini Futures Indices closed today. The Daily Heikin Ashi candle chartgrid below shows a lack of conviction or strength, at this time, on the part of buyers. In months past, we'd normally see a V-shaped bounce on this type of candle chart, with a decent rally following...but such is not the case now.
A look at the Weekly Heikin Ashi Candle chartgrid below shows, that on a weekly basis, no reversal pattern is yet seen.
I'll post another update after tomorrow's close to see how this week's candle closes.
I last wrote about the SPX:VIX ratio in my post of January 13th. The Monthly ratio chart below of SPX:VIX shows that price bounced a bit since then, and is now stuck in, what I've called the "Uncommitted Zone."
Until we see a move (with conviction) above (which stays above) the 100 Bull/Bear Line-in-the-Sand level, we'll continue to see whippy, volatile moves, which lack direction...or even see the next major plunge in the SPX and equities, in general. The Momentum indicator is still below zero on this timeframe...I'll need to see it pop above (and stay above) zero on any rally to confirm buyer conviction.
I'll post another update after tomorrow's close to see how this month's candle closes.
***N.B. This stunning announcement Thursday evening by the Bank of Japan to cut interest rates into negative territory immediately sent world markets and currencies roiling overnight...Japan's Nikkei Index made several harrowing round-trip spikes, totaling approximately 2,180 points! I'll post more on the effects on markets after Friday's close.
*UPDATE (as of Friday @ 10:30 am ET):
World markets rallied overnight and North American equities continue the bounce, as noted below (more later)...
*N.B. See my next UPDATE at this link.
Wednesday, January 27, 2016
The Canadian Economy: Was This A Warning?
In my post of January 8, 2012, there was much talk of a potential recession coming to Canada.
Since then, you can see from the 5-Year comparison chart below of Canada's TSX and EEM (Emerging Markets ETF), that they have traded, essentially, lock-step. Both are in bear markets since their highs in September 2014 -- the TSX is -20.8% and EEM is -33.79%.
The next 3-Year comparison chart shows the big reason why...namely, the gyrating price (both to the upside and downside) of WTIC Crude Oil, which has had a major impact on Canada's TSX. Oil is -71.45% since June 2014.
It would appear that, as goes the price of Oil, the TSX will continue to behave like an emerging market (unless Canada's Federal government provides some kind of meaningful fiscal stimulus for alternative projects and, also, fast-tracks plans to improve its distribution methods to, more efficiently, get its crude oil via pipelines from Alberta to the west and east for sale to world markets).
In the meantime, these are three markets to watch over the coming weeks and months for clues of either further weakness or evidence of bottoming and strengthening of the TSX, in particular, and, possibly, other world markets, as I mentioned in my post of January 5, 2015.
Since then, you can see from the 5-Year comparison chart below of Canada's TSX and EEM (Emerging Markets ETF), that they have traded, essentially, lock-step. Both are in bear markets since their highs in September 2014 -- the TSX is -20.8% and EEM is -33.79%.
The next 3-Year comparison chart shows the big reason why...namely, the gyrating price (both to the upside and downside) of WTIC Crude Oil, which has had a major impact on Canada's TSX. Oil is -71.45% since June 2014.
It would appear that, as goes the price of Oil, the TSX will continue to behave like an emerging market (unless Canada's Federal government provides some kind of meaningful fiscal stimulus for alternative projects and, also, fast-tracks plans to improve its distribution methods to, more efficiently, get its crude oil via pipelines from Alberta to the west and east for sale to world markets).
In the meantime, these are three markets to watch over the coming weeks and months for clues of either further weakness or evidence of bottoming and strengthening of the TSX, in particular, and, possibly, other world markets, as I mentioned in my post of January 5, 2015.
Saturday, January 16, 2016
World Market Index: Is This Capitulation?
I last wrote an update about the World Market Index on January 8th.
Since then, this index has continued to drop below the critical support level of 1600 and price now sits just below the next support level of 1550.
As you can see from the 5-Year Daily chart below, it's a long way down to major support at 1350. All three indicators point to lower prices...but, the swings are large, and we may see some kind of bounce, although it's not clear as to when or at what level that may occur.
If the U.S. markets are going to lead global markets to some kind of bounce, it's worthwhile monitoring the price action of the SPX and the SPX:VIX ratio, as I discussed in my post of January 15th, for possible clues as to timing of such a bounce.
Additionally, you can see from the 5-Year Daily comparison chart below of the SPX and USB (30-year U.S. Bonds) that, at times they traded in opposite directions, but were, more or less, in demand from the beginning of 2014, until January of last year, when they uncoupled, once more, and the swings on USB became very volatile. Furthermore, we now see, once again, a bearish Death Cross formation on the SPX, which hints of further downside movement, as do the lower lows on the RSI and MACD indicators. So, let's examine the price action more closely on USB.
So, have we reached capitulation yet on U.S. equities? As I mentioned in my post of December 8th, one gauge of market sentiment that I look at from time to time is my chartgrid of Foreign ETFs.
The following 1-Year Daily chartgrid shows the ATR on each ETF (the white histogram at the bottom of each ETF)...an extreme high ATR can often signal capitulation and a reversal of a recent general trend. Approximately one-half of them have put in an extreme, or near-extreme, ATR reading, which may indicate a possible slowing of the recent plunge in equities.
The next 1-Year Daily chartgrid shows that all of these ETFs are in downtrend, most of which have made a new low recently during this one-year period.
CONCLUSIONS:
While the above information tells me that the plunge in world equity markets may be slowing, or slow down sometime soon, we may see further selling continue (while investment continues in U.S. Bonds) until very extreme price, volume, and ATR levels are reached.
These charts are worth monitoring over the coming days/weeks for signs of any such capitulation and/or reversal.
Furthermore, one important world economic event to note is the upcoming 4-day WEF Annual Meeting. It concludes on Saturday, January 23rd. Any possible decisions coming from that meeting may influence world markets, either positively or negatively, and may provide a catalyst for a capitulation, as may the results of the next 2-day meeting of the FOMC on Wednesday, January 27th. By then, we're approaching the end of the first month of 2016, which may try to end on a positive note and erase the considerable losses that we see, thus far, on the following Year-to-Date graphs of the U.S. Major Indices and its 9 Major Sectors. However, the data from the latest Beige Book Report did not paint a rosy picture of the U.S. Economy...so any rallies over the weeks and months to come may be weak and short-lived.
Source: ForexFactory. com
Since then, this index has continued to drop below the critical support level of 1600 and price now sits just below the next support level of 1550.
As you can see from the 5-Year Daily chart below, it's a long way down to major support at 1350. All three indicators point to lower prices...but, the swings are large, and we may see some kind of bounce, although it's not clear as to when or at what level that may occur.
If the U.S. markets are going to lead global markets to some kind of bounce, it's worthwhile monitoring the price action of the SPX and the SPX:VIX ratio, as I discussed in my post of January 15th, for possible clues as to timing of such a bounce.
Additionally, you can see from the 5-Year Daily comparison chart below of the SPX and USB (30-year U.S. Bonds) that, at times they traded in opposite directions, but were, more or less, in demand from the beginning of 2014, until January of last year, when they uncoupled, once more, and the swings on USB became very volatile. Furthermore, we now see, once again, a bearish Death Cross formation on the SPX, which hints of further downside movement, as do the lower lows on the RSI and MACD indicators. So, let's examine the price action more closely on USB.
The following 5-year Daily chart of USB shows that price has now broken above triangle resistance and major price resistance of 155. While we have new "buy" signals on the MACD and PMO indicators, and the RSI is still rising above the 50 level, we don't quite have a bullish Golden Cross formation yet on the 50 and 200 MAs...although, it appears to be imminent. If price can rally and hold above the 60% Fibonacci retracement level around 160, there's a good chance that it will continue...which may, in turn, negatively or positively influence price action on the SPX.
So, have we reached capitulation yet on U.S. equities? As I mentioned in my post of December 8th, one gauge of market sentiment that I look at from time to time is my chartgrid of Foreign ETFs.
The following 1-Year Daily chartgrid shows the ATR on each ETF (the white histogram at the bottom of each ETF)...an extreme high ATR can often signal capitulation and a reversal of a recent general trend. Approximately one-half of them have put in an extreme, or near-extreme, ATR reading, which may indicate a possible slowing of the recent plunge in equities.
The next 1-Year Daily chartgrid shows that all of these ETFs are in downtrend, most of which have made a new low recently during this one-year period.
CONCLUSIONS:
While the above information tells me that the plunge in world equity markets may be slowing, or slow down sometime soon, we may see further selling continue (while investment continues in U.S. Bonds) until very extreme price, volume, and ATR levels are reached.
These charts are worth monitoring over the coming days/weeks for signs of any such capitulation and/or reversal.
Furthermore, one important world economic event to note is the upcoming 4-day WEF Annual Meeting. It concludes on Saturday, January 23rd. Any possible decisions coming from that meeting may influence world markets, either positively or negatively, and may provide a catalyst for a capitulation, as may the results of the next 2-day meeting of the FOMC on Wednesday, January 27th. By then, we're approaching the end of the first month of 2016, which may try to end on a positive note and erase the considerable losses that we see, thus far, on the following Year-to-Date graphs of the U.S. Major Indices and its 9 Major Sectors. However, the data from the latest Beige Book Report did not paint a rosy picture of the U.S. Economy...so any rallies over the weeks and months to come may be weak and short-lived.
Friday, January 15, 2016
SPX: In the Grand Scheme of Things
The Monthly chart below of the SPX shows where price closed today (Friday) in relation to its lows of 2009. The price has been bouncing in between two external Fibonacci retracement levels (127% and 161.8%) since October 2014 -- which represent major resistance and near-term support levels.
A break and hold below near-term support (at 1,823), puts the next support level at, between 1,730 and 1,735 -- a confluence of the 40% Fibonacci retracement level (taken from the October 2011 lows to the 2015 highs) and the 127% external Fibonacci retracement level (taken from October 2014 lows to the 2015 highs).
The next chart shows the percentage gained on the SPX from the lows of 2009 to the highs of 2015, as well as where price sits today in percentage-gained terms. The SPX is still around 156% above its 2009 lows, in the grand scheme of things.
So is it time to panic? Perhaps the time would be if/when price drops and holds below 1,823, inasmuch as major support sits far below, between 1,575 and 1,625 (quadruple Fibonacci confluence).
However, we will likely see continued volatile swings in both directions until a new trend is established either way, which could take most, if not all, of this year. In the meantime, it's worth keeping an eye on the SPX:VIX ratio, as I discussed here, to gauge volatility strength/momentum.
Thursday, January 14, 2016
Beige Book Report of 01/13/16: Not A Rosy Picture For U.S.
The following information is from Nasdaq.com...you can see that this latest Beige Book report does not paint a rosy picture for the U.S. economy.
Unless we see new, stimulative fiscal policy emanating from the U.S. Government this year (which is unlikely because of the upcoming Presidential election on November 8th), I'm not expecting any kind of drastic improvement this year. So, expect more volatility, without a clear trend in the markets, until then.
Unless we see new, stimulative fiscal policy emanating from the U.S. Government this year (which is unlikely because of the upcoming Presidential election on November 8th), I'm not expecting any kind of drastic improvement this year. So, expect more volatility, without a clear trend in the markets, until then.
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Wednesday, January 13, 2016
Market Volatility Now In "Fragile Zone"
Further to my post of December 3, 2015, the price of the SPX:VIX ratio has broken below a critical level of 100.00 and has fallen into, what I call, the Fragile Zone.
I named it this because, as you can see from the ratio chart below (where each candle represents 1/4 of a year), price has now encroached into the last major bearish candle of Q3 of 2011, and has also fallen below the 60% Fibonacci retracement level taken from the 2009 lows of this ratio to its highs of 2014.
A hold below 80.00 could see the SPX plunge, particularly if this ratio drops and holds below 60.00. The declining Momentum indicator is hinting that further weakness is ahead for the SPX...as I mentioned here, with respect to the E-mini Futures Indices.
I named it this because, as you can see from the ratio chart below (where each candle represents 1/4 of a year), price has now encroached into the last major bearish candle of Q3 of 2011, and has also fallen below the 60% Fibonacci retracement level taken from the 2009 lows of this ratio to its highs of 2014.
A hold below 80.00 could see the SPX plunge, particularly if this ratio drops and holds below 60.00. The declining Momentum indicator is hinting that further weakness is ahead for the SPX...as I mentioned here, with respect to the E-mini Futures Indices.
AAPL Update
Further to my post of December 9, 2015, AAPL has nearly hit its first downside target of 95.00, as shown on the following Weekly chart. We'll see if 85.00 comes next. 95.00 is a major support level, so if that's broken and held, we may finally see the SPX, DOW & NDX plunge.
There is no bullish reversal Heikin Ashi candle, yet, on the following Daily chart of the E-mini Futures Indices, which suggests that further weakness is in store for the equity markets.
There is no bullish reversal Heikin Ashi candle, yet, on the following Daily chart of the E-mini Futures Indices, which suggests that further weakness is in store for the equity markets.
Wednesday, January 06, 2016
New "Sell" Signals on the World Market Index
* See UPDATES below...
It would appear that the World Market Index is heading towards 1600 or lower, as we now have new "sell" signals on all 3 indicators on the Daily chart below.
As I mentioned in my post of June 8, 2015, the Shanghai and Nikkei Indices likely hold the key to its fate.
* UPDATE Jan. 7th: 1600, essentially, reached today...price closed at its low of the day. A drop and hold below that level would likely spark U.S. markets to accelerate this week's plunge.
We'll see what Asian markets do over the next few days...Japan's Nikkei Index is -6.65% and China's Shanghai Index is -11.7%, so far, this week, while the S&P 500 Index is -4.93%.
* UPDATE Jan. 8th: 1600 was breached today...price closed below at its low of the day.
The following 5-day comparison chart shows the Dow 30 as the black line at 0.0% (the baseline)...we can see from this that the SPX outperformed the Dow this week. while the NDX underperformed, and the RUT performed the worst. Even if Small-caps continue their weakness next week, we'll need to see weakness ramp up in Large-caps and continue in Technology, if markets are truly in trouble at this point. Otherwise, we may see a dead-cat bounce for awhile, until the plug is pulled in China, once and for all.
It would appear that the World Market Index is heading towards 1600 or lower, as we now have new "sell" signals on all 3 indicators on the Daily chart below.
As I mentioned in my post of June 8, 2015, the Shanghai and Nikkei Indices likely hold the key to its fate.
* UPDATE Jan. 7th: 1600, essentially, reached today...price closed at its low of the day. A drop and hold below that level would likely spark U.S. markets to accelerate this week's plunge.
We'll see what Asian markets do over the next few days...Japan's Nikkei Index is -6.65% and China's Shanghai Index is -11.7%, so far, this week, while the S&P 500 Index is -4.93%.
* UPDATE Jan. 8th: 1600 was breached today...price closed below at its low of the day.
The following 5-day comparison chart shows the Dow 30 as the black line at 0.0% (the baseline)...we can see from this that the SPX outperformed the Dow this week. while the NDX underperformed, and the RUT performed the worst. Even if Small-caps continue their weakness next week, we'll need to see weakness ramp up in Large-caps and continue in Technology, if markets are truly in trouble at this point. Otherwise, we may see a dead-cat bounce for awhile, until the plug is pulled in China, once and for all.
What's In Store For Oil?
We can see from the 3-Year Daily comparison chart below that, for the most part, Gold, Platinum and WTI Crude Oil have traded in tandem, although Oil has seen far more volatile swings.
Since December of last year, Gold and Platinum have attempted to stabilize and rally from their 3-year lows, while Oil's attempted rally was very short-lived, and price continues to plummet to new lows...we'll see if today's (Wednesday's) volume spike signals capitulation, or not, as shown on the next chart (5-Year Daily).
Watch for bearish crossovers to occur on the MACD and PMO, along with a lower low on the RSI, to signal further weakness on Oil. Otherwise, we may see an attempt by buyers to step in soon.
If we see a such a rally, particularly if Oil breaks above its major resistance level of 45.00, we'll see whether any serious buying continues in Gold and Platinum, and, if so, whether it is sustainable...especially if Oil breaks and holds above 50.00.
Since December of last year, Gold and Platinum have attempted to stabilize and rally from their 3-year lows, while Oil's attempted rally was very short-lived, and price continues to plummet to new lows...we'll see if today's (Wednesday's) volume spike signals capitulation, or not, as shown on the next chart (5-Year Daily).
Watch for bearish crossovers to occur on the MACD and PMO, along with a lower low on the RSI, to signal further weakness on Oil. Otherwise, we may see an attempt by buyers to step in soon.
If we see a such a rally, particularly if Oil breaks above its major resistance level of 45.00, we'll see whether any serious buying continues in Gold and Platinum, and, if so, whether it is sustainable...especially if Oil breaks and holds above 50.00.
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