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Friday, March 30, 2012

Friday Weekly Charts

 Here we are, the last day of the month and quarter, and I have the un-adorned daily chart with the March pivots. For the thrid month in a row, R2 has marked (approximately) the monthly high, which means mainly that we are in a bull market. What are the odds of the same thing happening next month? I don't know, but if we do hit it, especially early in the month, I will be looking to go short.

 Virtually nothing has changed on the weekly chart. I am not an Elliot wave analyst by any means, but a rough guess here is that we are in Wave 5 up form 2009, and in wave 3 of  Wave 5, so: we are due for a trip down (wave 4), followed by another move up which will likely take us to new highs (wave 5). After that, it's down elevator.

 Since not much changed this week, I will substitute charts this week, but I did want to look at the Russell 2000, which now clearly has resistance below the old high.This is now lagging pretty badly again, and I believe it is signalling a down move which should commence about any time now.

 Crude oil took a bit of a hit this week. right down to a long standing pivot point at 103. How it behaves here will determine not only what this does, but probably also what stocks do. A bounce hereand a move toward 115 will give the market pause: a move above 115 and the market will start to puke. A move down to the 90 area will probably be quite bullish for the market. If 90 is broken, that will probably mean loads of deleveraging, and we could see a very big drop in both this and equities. It will also mean we can afford to go to the gas station again.

The weekly chart for gold does not look nearly as bearsish as the daily chart. Gold has a habit of forming long bases, and breakouts tend to lead to big moves up. We are probably a few months away from anything like that.

Taken in context with the rest of the market, this is a mighty strange looking chart. I shudder to think what will happen here when "Operation Twist" is over, but it might not be pretty. Just going to a historically low yield of, say, 3% could result in chaos and calamity as the Treasury scrambles to try to pay the interest.

We are a couple of weeks away form earnings season starting, the last one of which, despite less than stellar earnings, resulted in a pretty strong rally. I don't expect earnings to be any better this quarter, and for a lot of sectors, they could be quite a bit worse. That does not necessarily lead to a spring correction, but I think the probability is it will.

I will have the new highs update shortly.

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