WE peg support at the hourly fourth wave of 44 for VXX. It may take a week to get back there if stocks rally here.
November 02, 2009
November 01, 2009
A Look at Gold Stocks
It appears that gold stocks along with the overall market are in for their first serious pullback since the March 9 launch. Note this is a weekly chart and GDX is down 9.25% for the week. MACD is just turning down and the money flow has turned negative. The FIB re tracements suggest the area between $33 and $37 will offer some support. The XAU and the widely held Franklin Gold Fund have similar patterns.
The Big Picture of course is the Dollar versus gold. Here the Dollar index is shown in Green, the perfect inverse correlation to gold and gold stocks. We will be updating this chart on various time frames.
October 31, 2009
VIX Mirrors the S and P
We have overlaid the VXX ETF for volatility with the SPX. The SPX is in purple to make it easier to distinguish, we admit this is hard to read but worth it. Note what a mirror image the two are of one another. While we do not claim to be expert in counting Elliott Waves, we follow people who do claim to be, and they are never sure until after the fact. Still the initial five wave pattern is clear. We are oversold and would expect a bounce this next week, but maybe not. Here is why
UUP an ETF that mimics the US Dollar bottomed Oct 23. Note at top that the SPX rolled over that same day. The huge black vertical bars at bottom are the volume exploding in UUP. Data suggests that 97% of dollar positions were held by shorts, as they scramble to cover the price of the Dollar is likely to skyrocket.
Remember, a dollar rally is a scramble for CASH. CASH to pay debt, cash to pay bills, cash to meet payroll, as unemployment rises cash is king.
September 23, 2009
September 13, 2009
A Bull Market in Volatility VXX
It is clear that the VXX forecast the big breakdown in markets when it crossed both moving averages in the summer of 2007, followed by the moving average crossover in August 2007.
Note that since then the VXX has stayed solidly above its 200 week moving average. The test last summer was successful, ie, the VXX moved back up. It appears the VXX is testing that level again. At bottom the MACD has turned up, at least that is the case for the histogram.
We showed the VXX and Dollar on daily charts opposite the SPX in a previous post. It appears that October might yet live up to its image as a dangerous month. By the way, the monthly chart is also above its moving averages.
Conclusion, VXX appears to be bottoming at its 200 week moving average. Such moves are necessarily long in coming but appear reliable in retrospect.
September 12, 2009
Dollar versus Stocks
Saturday Sept 12
The Dollar and US Stocks are clearly opposite one another. Which is to say it appears that stocks rise in dollar terms as the dollar falls in value. Are stocks really creating value or just a temporary shelf substitute for the buck? We labeled the current situation as looking for a fifth wave bottom. Markets go to extremes and this is a great example. The Dollar rubber band is really stretched, when it snaps back should be quite a show. The media, Warren Buffet, the UN, China, are all negative on the buck. Who is left to short the dollar?
The Volatility, or shall we say Complacency Index shows the same thing, can this hold until an Oct high for stocks, it has so far. Volatility has now matched the march low in stocks.
September 07, 2009
Silver Break Out
Volatility is the new normal. But the DBS power share that tracks silver had a solid close above its two year down trend line. See our previous posts that show silver tracking bond yields. This suggests that investors are seeing interest rates up longer term, no matter what Bernake and company say.
Yields follow Metals to the Upside
Monday Sept 7, 2009
The Red Black bars are the yield on the ten year treasury note. The black line is the price of silver.
As one can see, there is a close correlation. It appears that silver investors are seeing higher inflation or at least the need to buy silver as rates rise, or the other way round but whatever, both are rising.
Silver appears to be breaking to the upside on the important monthly chart. While the triangle may be a bit suspect, the histogram MACD at bottom is not. It is turning up from a negative position.
Such crosses to the upside are rare occurrences and last occurred in 2003 and briefly in 2008. But turning up from such an oversold condition is significant. An assault on the old highs in the $20 area appears to be the next event.
THe importance of what is happening here cannot be understated. Hecla is a silver peroducer with over 118 years in the business. It is not making money now and just skipped the dividend on its preferred issues. Still, confidence seems high that things are getting better. NO one wanted the metals i the go go years of the 1990s. Now HL has made higher low than its multi decade low in 2001. It has gotten past some resistance at $3. Volume shown above MACD appears to be positive. WE will continue to monitor this one. This should not be construed as a recommendation to purchase HL or any other security.
September 04, 2009
Gold and Silver Break Out
Friday Sept 3 post market close
Glold broke out as seen in this weekly graph of GDX. Volume is highlighted, price jumped out of the triangle and MACD is just getting started.
Silver has joined the party and offers even more potential. We show that in the next graph.
WE inverted the usual gold to silver ratio to show silver catching up to gold. This happened in the meltdown of fall 2008. Even if the gold price stops rising, silver should rise in returning to its more normal ratio to gold.
Why did this happen, because there were more buyers than sellers in gold and silver.
September 02, 2009
Exxon Fails to Confirm New High in S & P
Wednesday Sept 2, 2009
Once upon a time there was the GM bellweather Theory. The idea was that as GM went so went the USA. It may be that theory is still valid, GM is after all now post bankrupt and essentially a govt jobs program. But I digress.
I suggest the XOM Bellweather Theory. The more we investors vote on a future world wide demand for energy, the better the future for the economy. We have here a non confirmation, repeated three times this summer by XOM for the overall market. At top we have the price of oil, at bottom the SPX. XOM has three lower highs shown by the arrows. Yesterday's sell off generated a daily sell signal on XOM via the Parabolic Stop and Reverse. THat is circled at far right,
Notably XOM has not been able to move above its 200 day moving average, at least not for long and that was back in June. This suggests the markets will head down after Labor Day.
