pebblewriter

Category: Charts I’m Watching

  • XLF Update – June 5, 2012

    Financials play a pivotal role in the markets.  They led the way as they enabled the previous run-ups and bubbles, and they led the way down when the house of cards was revealed for what it was.  The survival of nearly all markets is hanging by a QE thread, so we’ll take a fresh look at XLF to see what the charts are saying.

    We’ll start with the weekly chart going back to inception in December 1998 — lot of water under the bridge with this ETF.

    Fortunately, for us analyst types, it’s been very amenable to chart patterns and Fibonacci analysis.  Consider this chart, that helped me call a top in banking stocks in late March [see: End of the Line and Lots More Where That Came From.]  Note the well-defined channel and the Gartley Pattern reaction at the .786 Fibonacci level.

    I’ve put together a series of charts that, I think tell a pretty compelling story regarding XLF’s future.

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  • Oil’s Balancing Act

    Many readers have been asking about oil.  It’s not that I haven’t been interested, it’s just been a real bear to analyze.  Here, after a dozen hours of racking my brain, is where I see it.

    Like many stock indices and currencies, Crude Light (CL) is at a critical stage.  It reached 114.83 after breaking out of a diamond pattern in April 2011, only to back test the diamond six months later at 74.95.  It then retraced .886 of that plunge, setting a lower high of 110.55 in February before plummeting once again as low as this morning’s 81.21 (the .886 is just below at 79.01.)

    CL now balances on a precipice, where a move in either direction is likely to be huge.  We’ll examine why, and which course is more likely.

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  • NYA Update – June 3, 2012

    The May 8 forecast for NYA was for the index to plunge from 7815 to 7340.  The forecast worked out well, as Friday’s low was 7286 (a quick 7% return, yay!)  As noted in that update, 7340 doesn’t really match up with any particular Fibonacci levels.  And, it doesn’t intersect with the rising wedge until early August (the highlighted oval.)

    I didn’t really see it taking that long to play out, and the market obliged for a change.  It also obliged by precisely tagging the fan line I had drawn off the Oct 2007 top (yellow, dashed) and one of the parallel horizontal channel lines (redrawn as red, dashed line E for emphasis.)

    We still haven’t landed exactly on a Fib level, so we either just overshot the .500 or haven’t yet reached the .618 target of  7145.  Deciding which it is presents some interesting questions.

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  • Channeling VIX

    VIX has very nearly reached the channel mid-line, Inverse H&S and Crab pattern targets I posted back on April 18  [see: VIX at a Crossroads], though we’re 2 days behind schedule.

    Our IHS target was 28.10 and the Crab pattern target was 27.12, expected to occur on May 30.)  Friday’s high was a very close 26.71.  It’s close enough to be considered complete, but a little follow through Monday morning would tie things up in a nice neat bow.

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  • The End Game

    Although the attached is a presentation on the current status of our wounded economy — limping onto the field one last time, hoping against hope that the steroids will last another 15 minutes, it also describes the turn your relationship with friends and family will take when sharing with them your scary new world view after reading this presentation.

    Best read it when you’re not going to be around civilians for a while.  From hedge fund manager Raoul Pal of Global Macro Investors: The End Game.

     

     

     

     

     

  • Why I’m Buying

    ORIGINAL POST: 10:05 AM

    I’m a bit surprised the Plunge Protection Team didn’t protect 1292 (but I imagine it means a Fed governor or the Bernank himself will be making an appearance sometime this morning.)

    I had set a mental stop level of 1295 yesterday, given the ongoing weakness in the euro and inability of the market to close positive on the day.  Two schools of thought going into the NFP release this morning: (1) that they would manipulate it upward, as usual, or; (2) that a brutally honest (hence, depressing) number would clear the decks for QE.

    I think the enormity of the miss (69,000 vs 150,000 expectations) clears the deck — and then some.  From a charting standpoint, it doesn’t hurt that we just completed a bullish Crab pattern at the bottom of a pretty convincing looking falling wedge with the SMA 200 just below current prices at 1284.56.  So, I not only lifted my remaining stops as the market fell this morning, I am buying more here at 1287.

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  • A Walk on the Arithmetic Side

    I normally construct charts in log scale.  In general, I regard it as a more legitimate way of viewing time and price relationships.  But, I try to remember to check in on the arithmetic picture from time to time.

    Here are a few arithmetic charts to consider…

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  • This Concludes our Test…

    That should be it.  Remember yesterday [see: Dueling Bancos] we talked about the little channel being established while the market searched for a Point C.  The lower bound of the channel was 1304…

    I think the exact price is going to be hard to pinpoint, and will likely depend on the nature and timing of news from across the pond.   But, leading candidates are the afore-mentioned channel bottom around 1304 and the .707 Fib/red fan line (from Oct 2007) that intersect around 1309-1310.  A push any lower should find strong support at 1300.

    We’ve likely just bottomed out just below 1300 (1298.90) and should head back up now.  The RSI hit the channel midline, which should be its low point, too.

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  • SPX: The View from 30,000 Feet

    Our charts have grown fairly “busy” lately, what with harmonic patterns, chart patterns, fan lines, channels, etc.  I find it helpful every now and then to take a step back and examine those elements that have had the biggest impact in recent years — and are likely to continue doing so.

    In my opinion, the two patterns that have influenced prices more than any other are Fibonacci levels (primarily related to the 1576-666 decline) and fan lines.

    Note how strongly prices reacted to each of the Fib lines off the Mar 09 lows.  Every Fib level played an important role in providing support and/or resistance at pivotal points.  The .236 didn’t slow the advance much, but it provided much needed support after a 9% decline.  A tag of the .618 touched off a 17% correction (caught by the .382) and set the stage for the Gartley pattern completion at the .786 a year later.

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  • Dueling Bancos

    We pick up this morning where we left off last night…the Banco de España and the Banco Central Europeo duking it out through their respective mouthpieces in the mainstream media.  It reminds me of another famous dueling scene from one of America’s greatest movies (obligatory clip below.)

    From the WSJ, reports that the EU is  advocating a cross-border banking union to back stop those financial institutions which are: (1) in danger of failing, and (2) those whose host (as in a parasite’s target, not a provider of hospitality) country has already been sucked dry.

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