pebblewriter

Category: Charts I’m Watching

  • Going For It

    ORIGINAL POST:  11:15 AM

    In something akin to a recess appointment, the market is making a run for our target area (the rectangle in the chart below) during a holiday-shortened trading session.  We’ll look at the chances it has of getting there and the most likely impediments.

    First, the little pullback we had to the midline yesterday was the 10-15 points I’d been discussing.  I wondered whether we’d get something bigger, but this morning’s action lays that option to rest.  It does, however, open the door to a bigger pullback at the 1.272 coming up.

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  • Reality Check

    ORIGINAL POST:   9:50 AM

    The ISM Manufacturing Report on Business is due out in a few minutes.  The details can be found here.

    It’s worth noting that the majority of global ISM reports have come in worse than the previous month and in a contracting state.  Zerohedge article and chart here.

    As I mentioned Friday, we are due for a little pull back.  It’s a midline of our rising RSI channel, which doesn’t always matter, but can frequently be good for a short-term trade.  I’ll be watching closely for a reaction off these numbers.

    Stay tuned.

    UPDATE:  10:05 AM

    The US has joined the party and is now doing the contraction limbo along with most of the euro zone countries.  The overall index fell from a modestly positive 53.5 to a modestly negative 49.7.  This is the first official contraction in PMI since July 2009 (readings below 50 indicate contraction.)

    Prices suffered a serious setback with a drop of 10.5 percentage points to 37.  Exports, impacted by a higher dollar, are also down significantly.  Put them together, and you get a new order reading that fell  12.3 points from a moderately positive 60.1 to a negative 47.8.

    Offsetting the negative manufacturing report somewhat is a better than expected Census Bureau report on May construction spending. Total spending was up 0.9% versus expectations of +0.2% and April growth of 0.3% (revised to 0.6%.)

    These are the seasonally adjusted figures  (the unadjusted figures aren’t very much off, for a change.)

    My take on all this…  manufacturers like to run near full capacity.  They’re able to use their inventory, plant and equipment and labor force more efficiently and will likely see higher profits as a result.

    Most real estate developers I know have to run at full capacity.  They’re leveraged up the wazzu and, like sharks, will die if they don’t keep moving forward.  Debt is usually against a project, rather than their personal balance sheets, so if they can find a bank dumb enough to lend on something — they’re building it.

    Given the choice of which tea leaves to read, I’ll go with the ISM report.  Even unjustified overbuilding can lead to positive economic knock on effects.  But, like consumer spending (that continues to rise despite a contraction in consumer income) there’s a real risk that the move won’t be sustainable.  We need a side of substance to go with our form.

    UPDATE:  11:10 AM

    Now, onto our charts:

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  • Update on COMP: July 2, 2012

    July 2, 2012

    COMP appears to be following a set of channels within a much larger channel we identified months ago.

    Whether it has the wherewithal to rise up out of the large red channel remains to be seen.  In the meantime, we’ll focus on the short to medium-term picture.

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  • Forecast Revision

    Note:  only six charter memberships are left as of EOD Thursday.  I’ll keep this going until they’re gone.  Congratulations to E.J., P.B. and T.J. for locking in today’s annual rate for the life of the site.

    * * * * * * * *

    Well, we got the rebound we were expecting…although it was a little unnerving.  As I posted at 10:30 yesterday — with SPX down 16 points at 1315:

    We had a similar dip the day before Q1 ended, too.  March 29 opened at 1405, dipped to 1391, and closed at 1403.  Money managers like to end quarters on an up note whenever possible.  This feels like a fake out.

    Sure enough, by late in the day we had rebounded to within 2 points of the opening, just like on March 29.  More importantly, we were right back on track with our forecast (the solid yellow line.)

    Likewise, the dollar caught up to our forecast (solid yellow line) in one fell swoop.  I was getting a little nervous, watching the growing divergence over the past few days.  The previous H&S was in danger of being busted; and, although we kept one foot on the long-term channel line, we were moving further and further away from the presumed right shoulder target.  No more.

     

    The pattern over the past 10 sessions suggests we’ll top out this morning at 1357.28.  That’s a Bat pattern retracement from the June 19 1363 high.  I’m also altering our forecast going forward.

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  • H&S Warning

    Note:  only six charter memberships are left as of EOD Thursday.  I’ll keep this going until they’re gone.  Congratulations to E.J., P.B. and T.J. for locking in today’s annual rate for the life of the site!

    ORIGINAL POST:  10:30 AM

    It’s a real crapfest on the headlines front:  JPMChase is likely facing a trading loss of $9 billion instead of $2 billion; the rumor about Germany backstopping euro credit was false; Obamacare is alive and well; banks are actually manipulating LIBOR for their own benefit; Q1 GDP was left unchanged at a pitiful 1.9%…

    Quick, which one of those wasn’t completely predictable?  Exactly.

    Even so, the market just fell out of our channel.   I can live with an intra-day departure as long as the little H&S pattern doesn’t play out (1309ish.)  Keep an eye on this guy.

    We had a similar dip the day before Q1 ended, too.  March 29 opened at 1405, dipped to 1391, and closed at 1403.  Money managers like to end quarters on an up note whenever possible.  This feels like a fake out.

    BTW, JPM’s trading losses are probably much bigger than $9 billion, too.  If you haven’t read it yet, this might be a good time to peruse The Wipeout Ratio.  JPM has $78 trillion in derivatives.  Even $9 billion is a pittance —  0.011% of the total.  I have to think they experience $9 billion swings every time Jamie Dimon gets the runs in his silk boxers.

    UPDATE:  2:20 PM

    While we’re at it, the 1309 SPX level looks like it’s probably linked to 83.182 on DX.  As we discussed above, 1309 is the area where a H&S pattern completes on SPX.  83.182 on the dollar is the area where: (1) a Gartley completes, and (2) the previous H&S pattern starts to be compromised.

    A lasting push above 83.182 (or below 1309 on SPX) potentially changes the picture.  Stay tuned.

    UPDATE:  4:30 PM

    We got the rebound we were expecting.  SPX never dipped below 1313.29, leaving a nice long shadow on the daily candle and closing well within our channel again.  Just like March 29 (mentioned above), we lost a net 2 pts on the day.

     

    DX got up to 83.07, and closed at 82.91 — leaving a spinning top on the day without exceeding the previous presumed shoulder that should see DX sell off substantially over the coming days as stocks move up.

    The yellow line marks the forecast I last updated on June 10 [see: Currents, See?].  Check in later for tonight’s post on the dollar.  I’ll have a complete discussion and updated forecast.

     

     

  • EURUSD Update: June 28, 2012

    While many others are dissecting the tussle in Brussels for hints as to the union’s future, I thought it would be a good time to revisit the euro’s chart.

    Our last forecast [June 10: Currents, See?]  forecast a run up to 1.28ish by June 15, followed by a dip to 1.25 and return to 1.2875 around mid-July.

    With the pair at 1.2638 after the latest “Spain is fixed” rumor, I posted:

    “I suspect the euphoria over the Spanish bailout will be relatively short-lived.  After all, putting the rest of the eurozone in harm’s way seems like a better way to get them downgraded than it does Spain upgraded.”

    Sure enough, the ramp fell apart and the pair was trading at 1.2441 by the next day.  It took the stuffing out of the next leg up, leaving it a little short of our 1.28 target at 1.2746.  Likewise, the next leg down was a little deeper than expected.

    As I write this, the Brussels bunch is just sitting down to cappuccino, positioning and posturing for the battle ahead.   In the end, I expect the Germans will come through for their less fortunate neighbors — kicking and screaming, of course.   Yes, it sucks for them.   But, I don’t see that they have a choice.  It’s a situation only the Borg could appreciate.

    Considering the likely sturm and drang, it’ll be a sheer miracle if the markets behave as I anticipate.  But, let’s take a look anyway.

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  • There and Back: June 27, 2012

    The market continues to follow our forecast nicely.  Recall we sold our longs and went short at 1330 on Monday’s opening, only to cover and go long later in the day at 1315 [see: Channel Watch].  Now, we’re back to 1332 and still long — as long as the channel holds.

    It’s been a wild couple of days, but we’re net 32 points ahead (yay!) versus just riding it out.  Looking at the bigger picture, I think we’re still well positioned.

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  • Update on FTSE: June 27, 2012

    I haven’t traditionally followed the FTSE-100, having found plenty of ways to lose money in markets closer to home over the years.

    But, at the urging of several members who have promised to go easy on me as I get up to speed, I’ve been taking a crack at it.  I trade and chart on Think or Swim, and unfortunately they don’t quote the index itself.  But, they do quote the UKX, which is 1/10th the value of the index.  So, it tracks just fine and it’s easy to do the math.

    The FTSE represents about 80% of the UK market and is cap-weighted.  As of March 2012, the top ten comprised about 50% of the $1.5 trillion whole:  Royal Dutch Shell A/B, HSBC Hldgs, Vodafone Group, BP, GlaxoSmithKline, Rio Tinto, British American Tobacco, BG Group, Diageo and SABMiller.

     

    Over the past five years, UKX has formed a triangle of sorts.  Its price pattern greatly resembles SPX’s, completing a .786 retracement of the 2007-2009 decline in early 2011.  Unlike SPX, however, it hasn’t topped its Feb 2011 high of 609.58.  It came close in May (608.94) and July (608.41), then did the same swan dive as the rest of the markets in July – October — eventually falling 20% before retracing all but 11 points by March 2012.

    During the course of its recovery, UKX has done a nice job of following fairly well-defined channels and fan lines.  A close up reveals sort of a coiling behavior, as prices have made progressively higher lows and lower highs.

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  • Membership Stuff

    The new website is off to a terrific start. I’m happy to report that we were up 34.87% versus a negative 4.15% for the S&P 500 over our first three months (details here.)  I’m told that if we were a hedge fund, this would have placed us in the top 3%.

    I’m also excited to see that our membership is growing at a respectable clip.  We now have members in almost every corner of the globe (Где ты, Россия?)

    This is cool for two reasons.  First, I love to travel.  And, if we can get 10-20 folks together in your neck of the woods, I’ll be there.  Second, a more robust membership means I can afford to spend more time posting.

    While we’re on the topic of memberships… as of this moment, we still have 9 charter annual memberships left.  These $700 memberships are guaranteed to never go up in price. If you’re currently in a monthly, quarterly or semi-annual membership and would like to save some serious money not only today but in 2013, 2014, etc., grab one while they last — and before prices go up in July.

    As I pointed out to a new member earlier, an annual membership saves you $500 (42%) versus a monthly membership.  I’m also extending the offer to rebate your last dues payment until these last 9 charter memberships are gone.  And, remember, two can join for only $500 each.  Larger groups are even less.  So find some friends and save.

    On another note, I’d like to know how many among you would be interested in doing a live webinar from time to time.  Everyone has different levels of experience, and it might be helpful for those who are still getting up to speed.  I’m thinking an hour or so once a week ought to do it.   Let me know if this interests you.

    Now, on to some really exciting stuff: log-in issues.

    I’ve done some poking around, and learned why some of you may be having trouble with being locked-out.  Apparently, some ISP’s generate a dynamic IP address each time a member logs in — even if the member is using the same computer to log in again and again.

    The system is set up to interpret multiple IP addresses as someone sharing their account, and locks them out.  The folks who run the website operations are working on a solution.  In the meantime, you might want to find out if this is the case with your ISP and see if they offer a workaround.

    If you get one of those unpleasant messages saying you’ve been locked out, clear your cache and cookies and try logging-in again (a good practice to follow anyway.)  This often helps with all sorts of log-in issues — not just pebblewriter.com.  If you’re still having trouble, just email me.

    Another issue some members have is staying logged in.  WordPress is clearly more buggy than Blogger (the old site) was.  And staying logged in can be challenging.  One thing that might help is to make sure you log in to the https://pebblewriter.com address rather than https://pebblewriter.com.

    The difference — that “s” after the “http” — signifies that the site is secure.  For some of you, switching back and forth might create problems.

    Others of you might find that your company’s IT folks don’t like “open lines” to sites like ours.  They might be the ones bumping you off unexpectedly.

    If anyone has any other helpful ideas, please send them my way.  In the meantime, I’ll continue looking for ways to make the site easier to log-on and stay logged on — whilst trying to outmaneuver the markets.

    GLTA.

  • Harmonics Scenarios

    Periodically, I like to go through and chart the various harmonic scenarios for both the upside and downside.

    It helps to pass the time while sitting and staring at the computer monitor, watching our forecast play out (so far, so good.)

    It’s also helpful in generating a set of potential outcomes for the market over both the near and longer-term.

    DOWNSIDE SCENARIOS

    Remember, all harmonic patterns begin with a significant reversal which we call Point X.  Over the past year, we can identify several obvious Point X’s, each of which generates its own set of Fibonacci retracements when paired with the recent 1422 high.

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