Precious Metals, December 31, 2010

Quick Takes:

• I think gold and silver are in the process of topping a Minute wave 5 of Minor wave 3
• I think gold and silver will soon correct in a Minor wave 4 that would cause an OEW mid-term trend change
• I may be wrong :-D
  

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We have been enjoying a really good ride in gold and silver. We have been in an uptrend since August. During this time, silver has been on a rocket ride up.

As we went through the process of following and charting Gold and silver prior to the takeoff of August, there were periods when we thought we were seeing conflicting counts between the two metal. Those conflicting wave messages got resolved as uptrend unfolded.

Right now we have counts on GLD and SLV that are in agreement as far as wave degrees go

This is SLV weekly

This is SLV daily

If correct, we may not be far from a conclusion to Minute (green) wave 5 = Minor (dark blue) wave 3.

This is GLD weekly

This is GLD daily

Silver has been the outperformer and its current Minute 5′s internal count looks cleaner than Gold.

Assuming that my counts are correct, I am looking for a top to happen and lead to an OEW trend change to give me Minor (dark blue) wave 4. If I get that, I will be looking to for signs of a bottom to start planning new purchases.

What if I am wrong and this is going to the moon with an extended wave? Well, I have a core position that I am comfortable with right now and it will make money.

What if I am wrong and the top happens but, instead of giving me a wave 4, it gives me a far deeper decline? Well, at some point, I will finally get a wind of my mistakes and exit my position. Let’s get the OEW mid-term trend change, and we’ll see what sort of downtrend we are dealing with.

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S&P 500 - December 29, 2010

Weekly momentum cycle of S&P appears to have turned


McClellan Oscillators have been stuck around neutral


There has been a plethora of opinions pointing out highly positive sentiment levels.

There has been no shortage of top calling.

While sentiment has been at statistically high levels of bullishness for weeks and S&P may have arguably looked toppy, it has held a tight advance and made new highs for the uptrend.


This situation may be frustrating to shorts and out-of-position bulls.

At Market Time premium, I have been following the uptrend that started late summer. I have pointed out divergences in momentum and breadth, I have also pointed out the inability of bears to do something bearish when they had chances to do early and mid December

I have emphasized the importance of price as the first and the last judge of all matters in the market.

To follow the trend (and the price), I have set, revised, and re-set price levels and conditions that might indicate a change in trend. I have identified levels of support in multiple time frames. I have also defined levels that might force me to sell all or part of my S&P position. As index rose, I revised and lifted my levels.

That has allowed me to stay in the game on the long side of the market despite constant calls of tops based on high sentiment, or divergences, or what-not.

Index will finally correct at some point. I am not sure when, but I can define, revise, and update my exit strategy so that I keep most of my profits when that turn finally comes.

Benard Baruch said

"Don't try to buy at the bottom or sell at the top. It can only be done by liars"

he also said

“You can have the first 20%, and I’ll let you have that last 20%; I’ll settle for the 60% in the middle.”


That's what I try to do: find a trend, run it, and book the most of it.


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Dollar Weak Today? - December 28, 2010

This morning, US Dollar looks weak against commodity currencies

It is hitting parity again with Canadian Dollar

And has lost parity against Australian Dollars

That has helped Precious Metals to find a good bid today


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S&P 500, December 23, 2010

Happy Holidays!

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Quick Takes:

• As we expected, market was thinly traded and volume was largely absent
• Weekly and daily frames look overbought
• If market moves below my top level of my three levels of exit/concern, I will let 1/3 of my position go
• Long-term trend is up. Mid-term trend is up. Short-term trend is up.
• OEW pivot support at 1240 and 1222. Pivot resistance at 1261 and 1291

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The weekly momentum cycle has gone flat. Looks like it needs a push one way or the other




Daily momentum cycle has turned and we see some short term breadth divergences


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Global Indexes – December 23, 2010

Let’s take a look at a variety indexes, one commodity, and one commodity-related index

Copper , TSX, S&P and, to a muted extend, Australia have kept pace making new highs.

Copper has been a hell of leading indicator so far in the grand reflation endeavour that started 2009.

We see that the Baltic Dry Index (BDI) has not been doing all that well. There has been a significant drop in the amount of shipping. Can it be that most of the rise of commodity prices are because of monetary reasons and not necessarily because of economic reasons? Is that why the emerging market EEM has been lagging the performance of TSX and Australia?

I mean, OK, two commodity centric indexes have been doing well, but a major group of commodity consumers are not looking all that strong.

Let’s take a look at a bunch of other indexes

Brazil, India and China all lag the recent highs by S&P, Copper and TSX

So, is the recent high a North American phenomena?

Yes, Russian (RTSI) index is doing fine, but I continue to refuse to regard the Russian index as an index of a free (whatever that might mean) market

Overall, it’s a non-uniform picture. Different countries, or securities go through different cycles. The important thing is the long-term trend that is still up for all of them, and flat for China.

Copper may still stay an important indicator. It has responded well to economic conditions. It has responded well to monetary conditions.

As I mentioned some posts ago, money (liquidity?) drives the capital markets. Favorable economic conditions may persuade money to stay in the capital markets.

A better global economy should see the Baltic index improve and the emerging markets improve. Without that, IMHO, we will be at the mercy, and the largesse of monetary policies for continued strength in major indexes.

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S&P - December 21, 2010

Quick Takes:

• S&P makes a new uptrend high

• We finally have a high (microscopic high) in A/D line

• Long-term trend is up. Mid-term trend is up. Short-term trend is up.

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You need a microscope to see the new high on A/D line. It will be better if it makes more highs. I still cannot take it lightly that it has lagged the price on this stretch from Nov low

Price is behaving alright -- So Far --, but inability of bears to force a meaningful correction may run the risk of buyer exhaustion

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S&P - December 21, 2010 - Intraday 2

Seems like my yesterday’s read of the 2 closing bars on the 60-min chart of S&P was correct and we indeed had a breakout.

This is the essence of trending. Identify a time frame , or time frames of activity. Try to catch a move. Set realistic goals. Decide of level, or levels of concern/exit, have an exit strategy, monitor and adjust.

Let the market carry a position if I am right, and stop a position if I am wrong.

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S&P 500 - December 21, 2010

Quick Takes:

• Yesterday seemed (and feel) like consolidation near the highs

• Long term trend is up. Mid-term trend is up. Short term trend is up

• OEW pivot support at 1240 and 1222. Pivot resistance at 1261 and 1291

• Dollar action looks positive at this point

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That we having breadth on some breadth gauges must be known to all at this point.

Can market advance while breadth lags? It has done it in the past.



A lagging breadth is a serious warning to start looking at exposure and risk. Price may or may not ignore lagging breadth.

I follow price, but pay attention to breadth and when it lags, I note it down as a warning to heed.

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GLD - December 19, 2010

This is a weekly chart with the preferred count that we have been following




The count has been holding verywell. If it is correct, we expect to see a succession of 5th waves to finish major (black) wave 3.

Weekly momentum cycle appears to have turned down





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NDX - December 17, 2010

Quick Takes:

• NDX is at 2007 high
• NDX is still in the blue channel that I started quite a while ago.
• Immediate support is around 2200
• There are negative divergences on momentum and breadth

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S&P 500 - December 17, 2010

Quick Takes:

• Short term price and short term breadth have a neutral posture
• OEW pivot support at 1240 and 1222. Pivot resistance at 1261 and 1291
• Long term trend is up. Mid-term trend is up. Short term trend is flat (a move below 1232 may turn it down)

There seems to be an uptrend in TED spread



USD is in a mid-term uptrend and is currently contracting in a tight short term range



I think it's worth keeping an eye on these two while monitor how S&P digests its recent gains



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S&P 500, December 17, 2010 - BMO

This OpEx week so far has been muted.

Bulls seem not have a reason to buy more with gusto, and bears seem like they are scared of being bears.

From weekly price point of view, index has a positive posture. There are some momentum divergences, but weekly chart looks positive still with ample support from breakout levels and a host of MAs



From a cyclicality and breadth point of view, S&P looks a bit stretched.




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S&P 500, December 16, 2010 - Intraday

So far, all bears have done has been a meager 10-15 point correction to the mini-breakout point of the 1235 area.

They need to move below 1232 to perhaps have a chance of maintaining the short term downtrend.

My top level stays at 1230.

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S&P 500, December 15, 2010

Bottom Line:

• Short term trend is down
• ARMS finally rose above 1
• OEW pivot support at 1222 and 1187. Pivot resistance at 1240 and 1261
• Long term trend is up.
• Mid-term trend is up.

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The question is whether the short term trend change can cause a mid-term trend change and bring an end to the wave we have been enjoying since August

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S&P - December 13, 2010

Bottom Line:

• Index gave back early gains.
• Breadth registered a mixed picture
• ARMS registered another low number
• NDX continues to underperform S&P

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S&P - December 13, 2010 - Intraday

If you remember, back in late November, I had range on a 60-min chart. If you do not remember, check the archives and find the 60-min chart off almost any S&P post.

I had a first upside target of 1250. We are almost there -- so, first target accomplished. 2nd target is 1275. 2nd targets are harder, less probable and pure gravy if they happen.


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S&P 500 - December 10, 2010

Bottom line:

• Bears failed to impress
• Bulls have a good technical platform to use and push higher
• Index has positive posture on all time frames and MAs are positively aligned on all time frames
• While technicals look positive, if this is a 5th wave, there may not be much room for complacency.
• ARMS is dangerously overbought and may need some sort of a drop to cool off
• The coming week is an OpEx week
• OEW pivot support at 1222 and 1187. Pivot resistance at 1240 and 1261.
• Long term trend is up. Mid-term trend is up. Short term trend is up
  

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S&P 500, NDX - December 9, 2010

Long-time readers know that I routinely use a McClellan set of oscillators as part of my breadth analysis

An interesting situation has developed where NDX's McClellan lags S&P's







It's a situation that I would like bulls to remedy soon.


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S&P 500, December 09, 2010 – Fib Projections

So far, I have been operating on the assumption that the current wave up from Nov low is an intermediate wave 5 of major wave 1. If this wave 5 can overcome existing breadth and momentum divergences and power higher, what would be a likely target area?

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S&P 500 – December 8, 2010

The drop of yesterday looks impulsive on this S&P future chart

The bounce, on the other hand, looks corrective.

Looks can be deceiving, but if I wanted to short, the high of yesterday would be my stop area.

Before shorting, I would strongly remind myself that it would be shorting an uptrend that has just made a new high, and that so far I have higher highs and higher lows.

I would also take into account that even if my interpretation of smaller waves were correct, the drop could simply be a wave A of a correction — maybe a shallow correction.

Last, but not least, I would take into consideration the index is above short term support levels that we discussed in the previous post.

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S&P 500 – December 7, 2010 BMO

Seems like we are going to have a new high.

It’s early still and things may change, but as Irish politicos are telling their people about the cuts and hardship they are going to receive from their budget masters, market seems to be giddy and bullish.

Anyhow, if we do gap up, it would be the second gap since the recent low and it would be the new high that is required for a 5th wave to achieve.

I would pay attention to short term levels I discussed last night in the premium post and also to the way MAs behave as I discussed in the premium post.

Those levels may rise and I will keep you informed

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S&P 500 – December 06, 2010

If you remember, the 13 EMA acted as hard floor for bounces for days and days during the run from August low. When it finally gave way

..............


That is nice technical action leading to a successful short term bottom

..............

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US Hypothetical Asset Rotation Portfolio

At the end of October, we saw Industrials and Discretionary falling off again. They don’t seem to stay in our top ranks consitantly. That’s OK, they returned positive and that’s what we want our ETFs to do.

Incoming ETFs were GDX, gold miners, and HHH, the internet. In good times, TECH usually gets a good 4th quarter into January. We’ll see

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At the end of September, we saw TLT falling out. We were a bit surprised to see the gold miners go. Industrials and Discretionary popped back in.

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At the end of August we had to let Industrials and discretionary go. They were replaced with gold miners and, to our raised eyebrows, TLT

The long bond ETF is probably a hangover of the summer malaise.

Portfolio returned a decent 3% for the month and recovered from August’s poor showing.

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After a summer holiday in cash due to market conditions, we started the hypothetical portfolio beginning of August with a total of 12500 dollars divided equally among our top 5 ranked US ETFs.

The portfolio returned negative at the end of August. This is in contrast to our Canadian portfolio, which did very well for August. Maybe Canadian market will be leader out of slump

Canadian Hypothetical Asset Rotation Portfolio

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At the beginning of November, we saw TSX small caps and discretionary leaving after only one month in the table.

Gold bullion 2x and TSX materials are in the table.

Notice that despite the fast rotation of some of the table components, at the end of November, the portfolio is doing really well, which is telling us that the broader market has not been doing all that poorly. This is especially true considering that November was a soft, down market while our portfolio did return positive at the end of the month

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At the beginning of October, we were a bit surprised to see TSX gold miners, materials, and gold bullion 2x left the table.

TSX discretionary, small caps and mining got into the table for the month of October

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At the beginning of September, TSX small cap and consumer discretionary left our monthly top 5 ranking to be replaced with TSX materials and gold miners

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After a summer holiday in cash due to market conditions, we started the hypothetical portfolio beginning of August with a total of 12500 dollars divided equally among our top 5 ranked Canadian assets.

S&P 500 - December 3, 2010

Index has an overall positive posture. It is hitting against the area of the prior high



We have very nice breakout. RSI has been expanding and is now



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As I Move On ...

I started blogging on September 12, 2008. During these past two years, I have had many good calls on the market. I have also has some poor calls. The past posts are there, and will be there for all to judge. Yet, it never was judgment that I sought from blogging.

For me it was a way to formulate my market thoughts and observations and share them with all.

I have now decided to take my main analysis and observations to a fee-based model.

This blog shall continue to live, and I have plans to continue posting here, but I shall be dedicating most of my time and effort to my new space at

http://markettime.wordpress.com

Market Time Observations Purchase

Market Time Premium is not accepting new subscribers at this time.



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S&P 500 - December 2, 2010

Challenging the top of the 1175-1225 range!


What a difference a few days make, eh?

If there is resistance to show by sellers, this is as good an area as any.

This is a daily


Near the top of early November. There is support below around 1200.

We had a second day advance on good breadth


McClellan improved to around neutral


If sellers want to show resistance, they should start soon or breadth may gather pace

Longer term measures of breadth did not get seriously oversold


There may not be a lot of shorts in the system to squeeze hard. It’s quite possible that these past few days has creamed the bulk of the creamable bears, especially since the gap of December 1 was not even touched. I can’t imagine a shorts not rushing to cover in a situation like that. If I am correct with that thinking, and if I am correct counting this as an intermediate wave 5, I should start looking for signs of a potential top.

I am not predicting any date or price point – just that I shall be taking it level by level as I have done in the past

This is 60-min


Nicely overbought!

Nicely impulsive!

So Far!

Support is around 1200 and resistance around 1225

As things stand now, a move below 1200 may indicate a short term trend change

Not much else to say :-)

OEW pivot support at 1187 and 1176. Pivot resistance at 1227 and 1240

Long term trend is up. Mid-term trend is up. Short term trend is up.

Have a Nice Friday!