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Good evening to you, Slopers, one and all. I confess to feeling a bit shell-shocked from the two-months+ unrelenting rise. It seems trading days come in only two flavors now: (a) trend days up; (b) modest dips, just to tease the bears, and then roaring rallies to new highs. It seems today was type (b).
The sea of charts I observe is looking more and more alien to me. I'm seeing fewer bearish opportunities, and the bullish opportunities I see are, on the whole, so elevated as to be unsafe. I'm already starting to dimiss the idea of any kind of meaningful drop taking place this year at all. Perhaps all we can hope for is a modest dip. One of the key reasons I have a "Bull Pen" watch list is to keep an eye on when these issues will drop to more attractive support levels. That time, if it comes, will probably signify the terminus of any gentle pullback that might take place.
So instead of spending time on sky-high long setups or never-seem-to-work short setups, I thought I'd just share a few FOREX charts. The first thing I wanted to point out is that the Euro seems to have changed its relationship to our equity markets starting about thirteen months ago. Until then, it had a very strong positive correlation; look at the black (EURO) versus the blue (S&P 500). Until the tinted area, they were in lockstep. Afterwards, the S&P seemed to acquire a much stronger grade of thruster fuel. The Euro still has a gravitational pull on stocks, but it only serves to retard the explosive rise (as opposed to making the market actually – gasp – fall any meaningful amount).
What's key is the level I've noticed below on the horizontal line. If we broke above this line, I think it's really off to the races for bulls. If by some divine miracle we break 1.3, it could change the game, at least for a few weeks.
One slight glimmer of hope is that the US dollar looks like it could be revving up for some serious strength against the Yen (BDI wrote about this at length with his ridiculously popular post yesterday). The chart below, the USD/JPY, is strongly bullish.
Well, brace yourselves for the earnings-induced buying orgy in the morning. I'll see you then.
Well, the prospects for stocks going down in our lifetimes appears to be getting vanishingly thin. Perhaps the VIX is heading to the single digits for good, logical reasons.
Earnings seasons is kicking into high gear this afternoon, and both Google and International Business Machines gave results that are pleasing to after-hours eyes. GOOG is trading around where I've tinted the chart in green; it's a big price move, but on the chart, it's not exactly a breakout:
A better-formed pattern is with IBM (whose after-hours trades, as of this moment, I've tinted in green). I would suppose that the bull-run that's been in place since November 16th will simply continue tomorrow.
I find it remarkable the role reversal that Apple and Research in Motion have taken on. Apple peaked almost to the exact day that RIMM bottomed, and since that time, the former superstar of the universe from Cupertino looks like a complete dork, whereas the battered Canadian has-been has been kicking ass and taking names. Truly this goes in the pantheon of the contrarian universe.
An e-mail from one of my Blog readers this weekend inspired me to write about the following…so, first of all, thank you, kind reader, for writing.
With price sitting just above a major uptrend line from the 2007 lows, as well as horizontal price support, this Weekly ratio chart of DBC:SPX shows that price may be due for a bounce on DBC, theCommodities ETF. If price can rally, break and hold above, firstly 0.02 where there is a convergence of resistance of the 50 sma (blue), 78.6% Fibonacci retracement level, and a short-term downtrend line, it has a chance to reach the 0.022 level, which is currently sitting just above the 200 sma (red), and, potentially, the 61.8% Fibonacci retracement level just above 0.023, or higher.
If equities weaken, we may see this scenario occur. However, we could also see cash flowing into both equities and commodities. It may be that money is/will be flowing out of Bonds to fund such activity…I last wrote about 30-Year Bondsin my post of January 18th…they are worth tracking over the next week(s)…with the Fed busy buying Bonds, it may be difficult to determine how much private money is flowing out of them…time will tell, as may the charts. One thing that may provide a clue on this is if we see increased buying volumes on equities and commodities and increased selling volumes on Bonds.
The bears have a shot at at least some downside this morning though there hasn't been any real selling so far this year. However the rising channel on SPX is holding, and the second touch of channel resistance on Thursday was retested on Friday on negative 60min RSI divergence. There's been some weakness overnight and if there is a break below 1470 then I have a small M top target in the 1457 area with some possible trendline support in the 1467 area. Here's how that looks on the ES 60min chart: