07/14/2012 Weekend Update

[xfradnex]

Ritholtz summary, yesterday:

Positives:
1) Yields in Spain and Italy back off from retest of recent highs.
2) China’s retail sales in June rise 13.7% y/o/y, above est of 13.4%.
3) China CPI up 2.2% y/o/y in June, slowest gain since Jan ’10 and PPI drops 2.1%, biggest since Nov ’09.
4) In terms of generating short term growth, Chinese loan growth of 920b yuan in June is more than estimates of 880b and the 2nd most since Jan ’11.
5) Brazil and South Korea cut rates as they’ve given themselves plenty of room by keeping rates ABOVE the rate of inflation unlike other central banks.
6) IP in Euro zone in May unexpectedly rises .6% m/o/m but still down 2.8% y/o/y.
7) US May trade deficit falls almost $2b as exports rise to 2nd highest level ever.
8) With mortgage rates falling to another record low, purchase apps rise 3.3%.
9) UoM one yr inflation expectations fall to lowest since Oct ’10 likely due to continued drop in gasoline prices.
10) June import prices fall 2.7% mostly led by energy.
11) 10 yr note auction off the charts in measurements of demand.

Negatives:
1) China’s economy in Q2 slows to the weakest growth since Q1 ’09.
2) Chinese imports grow just 6.3% in June, about half expectations ...
3) Australia unexpectedly lost jobs in June.
4) Japanese machinery orders in May fall about 15%, much more than est of a 2.6% drop.
5) NFIB small business optimism index not optimistic as it falls to 8 month low.
6) UoM confidence in July falls to 7 month low.
7) Notwithstanding record low in mortgage rates, refi apps fall to 6 week low.
8) PPI unexpectedly rises .1% m/o/m, modest but core rate still up 2.6% y/o/y. Inflation sticky as money printing meets global economic slowdown in battle royale.

[My conclusion: since there are 11 positives and only 8 negatives, then it’s bullish ]

I want a recount - Al Gore

[TraderJoe]

[quote="KeiZai"]Posted this chart on end of june, is playing out as was planned...but now is the key time must break through 40

Hi KeiZai,
Am I correct on this ABC chart;
If you measure the height of the wedge at the highest (Starting) point, which is 9 point, you then can expect this amount of rise in the stock from the point of the breakout???

[Al_Dente]

Goldman Sachs and the $580 Million Black Hole
“…a rare window on GS and the mystique that surrounds it…”
http://www.nytimes.com/2012/07/15/busin ... 5_20120715

[gappy]

ES-7-13-5-P.png

Lest we forget, our ole pard 99er.

[Al_Dente]

If you view ALL your major index daily charts over the long term, and use 320sma [courtesy Bernie Schaeffer] and 377sma [courtesy Fibonacci] you may note that the MAs are either crossing or are near to crossing, which is a phenomena that appears only every few years….
$RUT is leading the cross, confirmed by $TRAN and $BKX. The other indices should be monitored, as they are still holding bull, but all are near a cross.
Here is just the $RUT example:
[Caveat: this is intermediate to longer term, and has nothing to do with Monday's trades]

[KeiZai]

Posted this chart on end of june, is playing out as was planned...but now is the key time must break through 40

Hi KeiZai,
Am I correct on this ABC chart;
If you measure the height of the wedge at the highest (Starting) point, which is 9 point, you then can expect this amount of rise in the stock from the point of the breakout???

Yes 100% price target would be breakout point + 9, if you use Bulkowski´s measure rule (formula) then for symmetrical triangle it should be breakout price + (high-low)*66% = 39.90 + (43.50-34.50)*0.66 = 45.84...of course the price can go much higher, this is only technically/statistically speaking

[KeiZai]

if I counted right, should go somehow like this

[joe-gamma]

Whats different this summer?
June-July like exact replay in US equities.
- except interest rates are lower and OBV is lower and banks have less market leadership.

Thanks to all for great input!

[joe-gamma]

another Renko view, techs are showing leadership again this summer.
And OBV looks better (? due to ATR chart scale ?),,,
May 2012 lows were deeper than 2011 and took out spring 2012 lows.
HMMM?

[joe-gamma]

Some food for thought next couple of weeks:
Election years have more volatility in August [url][/http://www.cxoadvisory.com/3724/calenda ... -years/url]

Europe used to go on vacation all August, SOOO do they need to cover any positions in next 2 weeks (epic euro short squeeze AND?OR big flush of weak longs in US Treasuries perhaps?)

Anyone have data for corporate insiders from last summer ? ( Heard it is quite bearish now but sorry I do not have data...)

Thanks to all for Cobra's KING blog!

[Al_Dente]

Our Offensive/Defensive Ratio broke to bear, due to the relative outperformance of staples (“consumer defensives”).
XLP and XLU had breakout highs Friday, and XLV is at double top resistance.
So, as of Friday, our “”safe haven”” defensive sectors are still stuck on bear spy.

[Welcome joe gamma… thanks for great charts …ps: Are u GR?]

[joe-gamma]

Al:thanks for your charts and wisdom shared on this board!
GR? does that mean gas researcher?

Your charts seems to be saying less pessimism (lower BPstap) but I cannot figure out the new highs in discretionary spending...
I was looking at your gasoline chart (fast price decline) and fiddlin with a few charts, nothing seemed to jumpout for looking forward but the SPY priced in gas was interesting...

[Mr. T]

If you view ALL your major index daily charts over the long term, and use 320sma [courtesy Bernie Schaeffer] and 377sma [courtesy Fibonacci] you may note that the MAs are either crossing or are near to crossing, which is a phenomena that appears only every few years….
$RUT is leading the cross, confirmed by $TRAN and $BKX. The other indices should be monitored, as they are still holding bull, but all are near a cross.
Here is just the $RUT example:
[Caveat: this is intermediate to longer term, and has nothing to do with Monday's trades]

715wkndiwm.png

Yup, just a little more time......

Then we forget the turbo button and hit the eject button.

[joe-gamma]

Here is i/t trend follower that seems to point to some upside in stocks next week...bars are ES 610 minute so the chart spans the past 2months...after a big up, I wonder if monday gaps up and grinds lower on low volume,
or opens unchanged and fails on new highs for a doji,
or opens a bit lower and consolidates in upper 1/4 of Friday range?

[BullBear52x]

Just for fun, for educational purpose only. MACD study when to push that button for those who want to make a move purely base on MACD, again, just for fun. Bye!

[joe-gamma]

Our Offensive/Defensive Ratio broke to bear, due to the relative outperformance of staples (“consumer defensives”).
XLP and XLU had breakout highs Friday, and XLV is at double top resistance.
So, as of Friday, our “”safe haven”” defensive sectors are still stuck on bear spy.

[Welcome joe gamma… thanks for great charts …ps: Are u GR?]

715wknddefensive.png

Forgive me for being color blind today (earlier comment on discretionary new highs)...is it odd that gasoline has come down so much last 10+ weeks and XLY has not reflected that?
Maybe some chances of positive 'misses' in retail sales and sentiment looking forward next month or so?
my gut feeling is thats not likely, rather this is further confirmation consumers are tapped out SO spike in gas price will have a big negative impact on real consumption (but not a positive impact on gas price declines)

[Al_Dente]

You’d think the June-July roller-coaster channel action would be accompanied by heavy volume as everyone flipped sides.
Au contraire.
Here is total volume year-to-date, the blue boxes mark the SPY declines.
We have become accustomed to seeing higher volume on sell-offs and lower volume on rallys.
This time the selloff of the past week was accompanied by little total volume, in fact u can only point to the tiny pullback during the week of March 19 to see similar weak total volume, and the lack of selling volume stopped that particular March pullback dead in its tracks.

To state the obvious: when selling (volume) abates, so does a healthy SPY decline.
To put it another way: total volume did not confirm last week’s drop…
It’s all so clear IN RETROSPECT…. all we needed to bust that trend-channel support was MORE SELLERS… they vanished Friday… we’ll see if they will reappear en masse after this bounce plays out…

More on volume:
Longer term: cumulative net-up-volume $NYUD, did not confirm the April SPY high
Short-to-intermed term, it is still weak. You can see how it has only retraced about 38% of the April to June move, while SPY has retraced about 50%.

"Economic history is a never-ending series of episodes based on falsehoods and lies, not truths. It represents the path to big money. The object is to recognize the trend whose premise is false, ride that trend and step off before it is discredited." [George Soros]

[Al_Dente]

Our Offensive/Defensive Ratio broke to bear, due to the relative outperformance of staples (“consumer defensives”).
XLP and XLU had breakout highs Friday, and XLV is at double top resistance.
So, as of Friday, our “”safe haven”” defensive sectors are still stuck on bear spy.

Forgive me for being color blind today (earlier comment on discretionary new highs)...is it odd that gasoline has come down so much last 10+ weeks and XLY has not reflected that?
Maybe some chances of positive 'misses' in retail sales and sentiment looking forward next month or so?
my gut feeling is thats not likely, rather this is further confirmation consumers are tapped out SO spike in gas price will have a big negative impact on real consumption (but not a positive impact on gas price declines)

“”””””””””””””earlier comment on discretionary new highs”””””””””””
NO NO NO, comment was on DEFENSIVE higher highs, specifically XLP staples, XLU utilities and double top-ish XLV health…………
NOT discretionary higher highs… not yet at least...
THREE DEFENSIVES VERY STRONG = BEAR SPY SIGNAL-ish at the moment, and that may/will change if this bounce gains steam. (BIG “if”)
I luv XLP for bear watch, bcuz no matter how bad Armageddon gets, we will still eat, smoke, and buy toilet paper……..

Yes, agree, low gasoline prices are seen as a “stimulus” cuz u save money on gasoline, then go out and spend it on crap XLY discretionary stuff
…….so yes, we should see it reflected in a stronger XLY, but apparently not yet…..

[joe-gamma]

for fun only...probably just spurious ...More spec on the gas ratio, now discretionary XLY priced in GASO, seems might be some confirming type indicator lurking in this murky water... (sorry I cannot annotate within charts)

apr-june 2010 gas ratio (xly priced in gas) failed to make new lows but stocks did=positive divergence as IWM rallied rest of year. Rally stalled when ratio made new lows in spring 2011.

Stocks were bearish fall 2011 but ratio only made higher lows =lack of confirmation to bear market...

ratio rallied late 2011, setting stage for bull market in stocks early 2012.

Stocks have been in a range last few months and the ratio just made new highs...if this is leading, then will stocks make new highs before the next bear market?

Caveat: i got a degree in economics a long time ago...which means I can jump from a hasty generalization to a foregone conclusion in the blink of an eye!

[Harapa]

Sector rotation is observed as business cycle lives its life. In early phase (expansion ) more risky assets are favored while more conservative assets are favored in the late phase.

Sector Rotation model.gif (8.23 KiB) Viewed 3570 times

Here is an indicator derived from 75 period ROC of XLK/XLF/XLY and XLE/XLU/XLP (>0 expansion phase, <0 contraction phase). Per this indicator we have moved into contraction phase.

This indicator is described in August issue of Technical Analysis of Stocks & Commodities. You can download an excel template from here to play around with it. http://www.traders.com/Documentation/FE ... sTips.html