Slope of Hope Blog Posts

Slope initially began as a blog, so this is where most of the website’s content resides. Here we have tens of thousands of posts dating back over a decade. These are listed in reverse chronological order. Click on any category icon below to see posts tagged with that particular subject, or click on a word in the category cloud on the right side of the screen for more specific choices.

Tale of Two Markets (by Mike Paulenoff)

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We're keeping an eye on Chinese ADRs, like Trina Solar (TSL), which we discussed yesterday, in view of the strong relative showing of the Shanghai Composite Index compared to the Cash S&P 500 (SPX). I have a thesis that the global equity markets are in a leadership transition from "West to East," or from the U.S. to China (reflective of the "real world," no doubt). Political, economic, financial transitions along the magnitude we are talking about are never completed without turbulence and chaos before the dust settles, after which a "new order" emerges.

Chinese companies are in a position to prosper during and after the transition. Perhaps the enclosed chart picture is reflective of the progressing divergence of the two equity markets. As the chart shows, it's a tale of two markets. On the one hand, we have the Shanghai Composite, which hit a significant reversal low on July 2 at 2320 and climbed sharply to its August 19 high at 2702 (+16.5%). Since the high, the SH Comp has pulled back to today's intraday low at 2615 (-3.2%), prior to turning up and closing higher today at 2650.31, which positions the benchmark China index just 2% beneath its August high and 14.2% above the July low. Let's also notice that today's action reversed off of the rising 20 & 50 day exponential moving averages, which is a very positive technical sign.

On the other hand, the cash SPX exhibits a considerably weaker technical picture in the aftermath of its 11.7% July-August upleg. With the cash index at the equivalent of 1060 at pre-open today (and much lower since), it is 6% beneath its August high, and has violated and sustained beneath both its trading moving averages and its July-August trendline (1067). At 1060, the SPX is poised to test its prior significant pivot low at 1056.88 from July 20, which if violated could trigger a downside press directly towards the July low at 1010.91. Only a sharp upside reversal and rally that propels the index above 1072 will establish initial signals that the SPX has put in a significant near-term low.

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Originally published on MPTrader.com.

Chart on Trina Solar (TSL) by Mike Paulenoff

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All of the action in Trina Solar (NYSE: TSL) off of the July high at 22.45 through today's trading has the right look of a mature (read: nearly complete) bullish coil pattern, which if accurate means that the next significant directional move should be to the upside in a thrust out of the coil towards a target zone of 25.00/50.

Only a decline that breaks and sustains below key support at 21.90-21.60 will damage the coil and morph the pattern into a top rather than a bullish continuation.

TSL, which reports tomorrow and may see some earnings-reaction swings, should benefit near-term from UBS's upgrade today of First Solar (FSLR). In addition, after the FSLR upgrade, Collins Stewart noted: "Trina Solar (TSL) remains a top pick in sector… Trina Solar has one of the lowest cost structures in the industry, a strong balance sheet and strong brand. Shares are Buy rated with a $29 price target."

Finally, there is a China connection to my technical preference for TSL, which is based in Changzhou. China energy costs and demand for cleaner sources of fuel argue strongly for a huge presence in solar in and from China. In addition, the technical outperformance of the China market is a theme to my outlook now and in the months ahead.

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Originally published on MPTrader.com.

Shanghai-SPX Comparison (Mike Paulenoff)

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Instead of breaking out to the upside above 2700 today, the Shanghai Composite instead rolled over into a bout of profit- taking (-1.8%). That said, however, let's notice that the weakness has not violated any meaningful technical levels, which are clustered in the 2593/90 area, and again down at 256.00. A downside sustained breach of 2564 — the prior pullback low — will indicate that the Jul 2-Aug 19 upleg is complete, and that a significant correction is in progress that could press the index back to 2500-2470, or even revisit the July low area at 2400-2320.

Right now, the most bullish scenario calls for a bit more weakness into the 2600 area followed by an upside reversal that initiates a new upleg. A climb that sustains above 2700 is needed to trigger upside acceleration. The $64K question is whether the SH COMP is leading the SPX or vice-versa? Let's notice that the SPX weakness today further diverges from the technically stronger SH COMP. I will be very interested to see if the China market can hold up despite the SPX weakness, which will further convince me that we are witnessing a major transition in equity-business-economic hegemony to the East from the West.

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Originally published on MPTrader.com.

Chart on Silver (by Mike Paulenoff)

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It is interesting that silver prices and the iShares Silver Trust (SLV) are up nearly 2% this morning, in sympathy with higher gold and a pullback in the dollar, but perhaps most importantly in sympathy with a sharp upmove in the Shanghai Composite Index (+2%), which suggests strongly that China is not slowing down nearly as much as the financial press would like us to believe and could very well become an increasingly supportive factor for industrial (and precious metals).

Let’s notice that the SLV is pushing up against its near-term resistance line at 18.12, which if hurdled and sustained should trigger a run at its more important May-Aug resistance line, now at 18.43. In that all of the action off of the May 13 high at 19.44 has taken the form of a large coil-type congestion pattern, a sustained upside penetration of 18.43 will argue that the price structure is emerging to the upside from the coil and is in the early stages of a new upleg that has measured upside potential into the $20 area next.

Only a failure to climb above key resistance, followed by a downside violation of last week’s low at 17.43, will damage the developing bullish pattern.

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Originally published on MPTrader.com