THE DAILY FORK FULL
The Asian markets are ahead of the US so FXI, the US ETF for large-cap Chinese stocks, was able to respond Friday to the big drop in China. The reaction was mild with price gapping down only 2.1% on the open and dropping another 33 cents during the day.
Regardless of the hot air being blown by the Fed, interest rates are rising. While they like to pretend that they are in charge, the markets are raising rates now and not waiting "until September" like the Fed is saying.
This large-cap energy stock is considered relatively safe as stocks go, and with a yield of 3.4% it throws off a respectable amount of income. We will have to see if investors continue to hold the stock at $70 or if we see a large capitulation as they puke their shares into the market.
NASDAQ briefly touched 5132.52 in March of 2000 and then backed off before the close. Today price reached 5143.32 before backing off. The close today at 5132.95 was still above the prior high.
Dr. Copper doesn't care how much fiat currency gets printed or how many quantitative easings occur, he is only interested in the real economy where people are either building things or they aren't.
The blue modified-Schiff fork has identified support and resistance levels throughout oil's decline from $100+ down to sub-$50 and it continues to mark the upper end of oil's current price range
We will find out pretty quickly what the Transports are going to do next. Price is right at the upper median line of the Andrews pitchfork and this is a proven resistance level.
The only thing holding the US economy together at this point (besides spit and bubble-gum) is low interest rates. The strong rise in TNX is definitely a cause for concern.
The Dollar is demonstrating a great deal of strength and we should be very cautious about assuming that it is rolling over at this point.
The Fed keeps saying they will raise rates eventually but rates appear to be rising without the Fed's intervention.
This particular doji occurred on the third day that price was pushing against resistance at the median line of the pink Andrews pitchfork. Having the doji at an obvious resistance level suggests topping and not just hesitation.
Instead of spending more time questioning the social media phenomena, let's focus on the stocks of the four biggest companies in the sector and see what the market thinks. After all, from our perspective as traders and investors, the market is where the rubber meets the road.
Gold is up about $35 in the last few days. Price has risen to the 50 day exponential moving average and is now pulling back a little to consolidate the fairly substantial rise.
Bull rallies don't end all at once, they end one stock at a time. Seeing signs of topping in a major stock like AAPL contributes to the idea that the current bull is getting tired of running.
The decline was impulsive meaning it occurred without pausing to consolidate or retrace at any point. The impulsive nature of this move and the fact that it violated 4 prior lows sets up a very high probability A-B-C-D move where we can apply the Fibonacci extension tool.
Price rarely makes a 3 standard deviation (sd) move much less a move greater than that. Since the bottom in 2009 there has only been 3 times when price penetrated the 3 sd Bollinger Band (BB). Notice that in 2011 and 2014 the penetrations were spike bottoms where only the wick of the candlestick poked outside the lower BB. In contrast, the candlestick body for last week penetrated the BB with price closing on its low instead of bouncing.
The mining stocks are looking better this week. Price turned up bullishly along with the strength in the metals. After the strong move up Monday through Wednesday HUI is pulling back to test its breakout level and support along the median line of the modified-Schiff pitchfork.
While printing press money and financial machinations can inflate an economy for some period of time, the real economy involves actual products that are manufactured by a supplier and purchased by an end user. Copper is a key component of many of these products so economic analysts consider Copper to be the best indicator of economic health.
I believe we have seen capitulation in the mining sector. I will be looking at two possibilities for adding to my portfolio. The most conservative strategy is adding shares of the dividend paying miners (e.g., GORO 5.3%, GG is paying 4.5%). A more aggressive strategy is buying LEAPS on some of the best silver miners.
It is my opinion that we are still several weeks or months away from seeing a bottom in the precious metals sector. What we really need to see at this point is a serious capitulation where all the weak hands puke their positions into the market.
It's been an interesting week in the financial world. China's equity markets are crashing despite desperate attempts to put a floor under prices. Extreme measures finally caused a bounce in prices. Germany is suggesting that Greece takes a five year vacation from the Euro.
There are interesting moves afoot in the financial markets these days. The Chinese equity markets are crashing, the Greeks just flipped the bird to the "troika" and Puerto Rico is lobbying for their "right" to declare bankruptcy.
Our bias on the precious metals sector is neutral. The metals are waffling sideways and the stocks are doing pretty much the same. The bull market will return at some point but we aren't there yet.
The charts are more bullish than bearish. Although MACD sell signals in monthly charts are a cause for concern, seasoned traders like Tim Morge with 35+ years of experience ignore the indicators and focus strictly on the price action. If we do the same we would be talking about the high base patterns and upside targets showing in these long-term charts.
When the banks are paying almost no interest on savings accounts or CDs, income investors are forced into the stock markets in search of yield.
Action in the equity markets Friday was fairly bearish. If we don't get a bounce Monday or Tuesday the selling could easily intensify from this point.
At some point this bull will rollover and die but nobody can accurately predict when. All we can do is watch the charts and manage our risk appropriately.
Let's take a look at the equity indexes this week. It looks like they are trying to break higher. We have new all-time highs this past week in the NYSE Composite, the S&P 500 and the Dow. The NASDAQ made a new all-time weekly high three weeks ago.
Gold is showing strength this past week and challenging its 200 day exponential moving average (EMA). This strength has motivated some of the mining stocks to push higher as well.
Is it possible we are seeing a turning point in this six year old cyclical bull market? Perhaps, but "buy the dip" seems to be the profitable strategy for now.
In summary, when we look at the small, mid and large-cap segments of the market, there is more weakness than strength visible. All three segments are showing MACD divergences and, even though higher prices are being reached, these price highs are occurring further below the median lines.
Today we are going to review all of the equity indexes looking for new breakouts, topping action and overbought-ness. On the bearish side, the markets could be showing us what a buying climax looks like after a six year cyclical bull market. On the bullish side, they could be demonstrating how a breakout into a new upleg occurs.
I’ll be the first to admit that I suffer from goldbugitis. Perhaps there should be a support group: “My name is Bryan and I’m a Gold Bug. It’s been 3 days since I fondled my Gold coins…”.