Category Archives: Indicators

Fed Stimulus “Canaries” About to Croak?

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I last wrote about the Fed Monetary Stimulus “Canaries” in my post of December 16, 2014. As a reminder, I chose six of them (ETFs) in order to determine their relative strength/weakness against their respective Stock Market Index, since they may have held clues for further accumulation in riskier assets due to respective Central Bank stimulus programs.

So that we can compare their current relative strength/weakness, I’ve provided the following 5-Year Daily ratio charts for each “Canary.”

OBSERVATIONS

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Significant Low for BABA?

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Alibaba Group Holding Limited (BABA) has climbed sharply and hurdled key resistance at 82.20 to 83.60, which has improved its near-term technical set-up, and points BABA towards an important test of its Nov-July resistance line, now at 87.50.

Only a sharp downside reversal that breaks 82.00 will wreck the current set up-up.

Below is what we wrote one week ago when BABA was trading at 80.33/34.

All of the action in BABA since its March low at 80.01 shows a series of lower-lows, but none of the breaks precipitated an acute downside follow-through, which could represent a meaningful support, accumulation, and bottoming period, or in the absence of a rally above 88.40, a multi-month sideways bearish, digestion period ahead of another downleg that will look much more like an acute downside capitulation.  (more…)

Revising the Ratio

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I did a recent post here and over on ZeroHedge which got a lot of views based on the SPY/GLD ratio. Some readers pointed out something that hadn’t occurred to me before: the ETF GLD didn’t even exist until November 2004, which means the ratio is really only valid starting on that day. (SPY, on the other hand, the first ETF, was created early in 1993).

I assumed incorrectly that ProphetCharts would only begin charting a ratio at the most recent start day for any symbol used. I assumed wrong. This would normally be excusable were it for not one inconvenient truth:

0720-bytim

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A Ratio Worth Respecting

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Two months ago, I did a piece called A Fascinating Ratio, which suggested that a major reversal was coming once the ratio reached about 2.0. At the time I did the post in mid-May, the ratio was a little under 1.8, but thanks to the unflagging strength of equities, as well as the unwavering suckiness of precious metals, this ratio is up to 1.95. We’re getting very, very close to what I think will be a major pivot point, and perhaps the pairs trade opportunity of the decade:

0717-SPYGLD

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ES Short (by Retracement Levels)

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After the recent “mental waterboarding” (as some media called it), Greek Prime Minister Alexis Tsipras is now on the run, in search of his forgotten identity (the one where he had promised to terminate austerity and reject Greece’s creditors proposals):

The Tsipras IdentityIn the meanwhile, the E-mini S&P500 (ES) has reached interesting OVERBOUGHT levels. If the Greek Parliament rejects the deal signed by Jason Tsipras, oops sorry, Alexis Tsipras, the market may tank again from here, this is why it’s important to see what our SHORT model (below) is saying.

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Schrodinger’s Pumpkin

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I posted a chart on twitter last night showing the falling megaphone that formed during the day and the triangle that formed and broke down near the close. What happens to a short term pattern like this overnight? Well that rather depends on where the open is the next day. If there is no gap then the pattern will often play out as though it had never been interrupted. If the market gaps away hard then the pattern becomes irrelevant.

Back in the old days you’d have to wait until the open to find out whether the pattern was a fine carriage or just a pumpkin, but nowadays the futures can tell us which is more likely and this triangle, sad to say, is going to be a pumpkin.

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ES Short from Retracement Levels

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Yesterday the market tried some recovery, amidst a flurry of news coming from Athens, Brussels and Berlin, regarding the risk of Greece defaulting on its debt. The bounce had retracted completely by the end of the day, but overnight the market is trying again the same rebound, so today the Close may be positive.

In the ESU15 DAILY chart below we can see the next valid support and resistance levels and we have highlighted the fact that the market will reach 100% odds to go SHORT DAILY at the 2091 level. This means that based on our DAILY model reading, the market is already OVERBOUGHT and marching towards a 100% OVERBOUGHT DAILY condition. A new pullback is nearly sure to happen before then. It is hard to say if it will be another sharp pullback or just a small one followed by higher prices. We can only say that when the odds are good, LONG or SHORT, you must take action to profit from the upcoming reversal.

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