Friday, November 30, 2007

Friday Market Sentiment

Disclaimer: All charts and comments are intended for education and discussion purposes only. No investment recommendations are being offered. Please do your own research and take responsibility for all investment decisions that you make. Questions and comments related to this post are encouraged.  | MON - Sector Strength | TUE - Interest Rates | WED - Market Breadth | THU - Commodities & Currencies | FRI - Market Sentiment | SAT - Bullish Percents | About | contact: HeadlineCharts@gmail.com |


The blogger market-sentiment is the highest I have ever seen it.  Apparently they are believers that the Fed liquidity is going to make its way into the equities.  I assume this means that these bullish bloggers already have most of their money, and their reader's money, invested in the market.  So this works against stocks unfortunately.  However, the individuals are still very bearish which works in favor of stocks.  The newsletter writers are the most important and they are close to the below-45%, bearish level required for a low-risk entry point into the market, but not quite there yet.  Bottomline, bullish sentiment as measured by the surveys is higher then it usually is when the market is about to kick off a sustained uptrend.  This means that risk is higher than usual, and the new upcycle may not last as long as usual. 



The chart above is another look at the newsletter writer's sentiment showing the broad perspective.  It shows that sentiment has only moved about halfway to the extreme low-risk entry-point level shown during the best opportunities in the past.



Above is a great chart from a new site IndexIndicators.com that shows sentiment measured by the 20-day ma of the total put/call ratio.  It shows that fear measured by the ratio never reached the extreme level associated with past lows in the equity price index. This reinforces what the sentiment surveys are showing... sentiment isn't at a level indicating a low-risk entry point.  So invest with caution.
The survey information above can be obtained for free via the following sites.  Investor's Intelligence is from Market Harmonics.  Individual Investors is from aaii.com.  Low Risk is from lowrisk.com.  Birinyi Bloggers is from Ticker Sense.  For additional information about market sentiment, I recommend a blog by Brent Leonard.


Sentiment analysis is an important component when following the markets, and is considered a “contrary” indicator.  Contrary because if too many people are bearish then there aren't enough sellers left, the balance tips to buyers, and the market starts to advance.  If too many people are bullish, most funds are already invested, the balance tips to sellers and the market weakens.  One way to determine if investors are bearish or bullish is by taking surveys and tracking at what levels these polls indicate investors are at the extremes of bearish or bullish sentiment.


Keep in mind, sentiment analysis is not a science and only provides very general information.  Sentiment is not a signal to take action, but provides background about the current state of the markets.  For instance, there have been many occasions when bullishness reached high levels well before the market started to weaken.

Posted by HeadlineCharts at 06:12:08 | Permanent Link | Comments (1) |

Thursday, November 29, 2007

Thursday Commodities & Currencies

Disclaimer: All charts and comments are intended for education and discussion purposes only. No investment recommendations are being offered. Please do your own research and take responsibility for all investment decisions that you make. Questions and comments related to this post are encouraged.  | MON - Sector Strength | TUE - Interest Rates | WED - Market Breadth | THU - Commodities & Currencies | FRI - Market Sentiment | SAT - Bullish Percents | About | contact: HeadlineCharts@gmail.com |


Well, here we are.  Back in IBD rally mode.  But with a warning from IBD not to move too quickly to fill out positions and not to tap into margin until the market proves itself.  Good advice I think.  Also, here are two news sites you might want to check out, IndexIndicators and InTrade Prediction Markets.




The majority of commodities prices remain strong and above the 40-week, but there are signs of some weakening.  Energy-related commodities are all pulling back from their highs, and industrial metals have fallen below the 40-week.  It makes sense that the hot commodity price increases will cool with a considerably weaker global economy.  This means that this new equity rally will probably not be led by energy and materials as rallies have over the past few years.  But so far this graph of the commodities isn't pointing to serious weakness.  As long as commodity prices maintain current levels, then the trend in commodities is favorable towards the economy and equity prices. 



The weak Market Vane survery result provides more evidence that commodities and the commodity-related stocks will probably not be the best place to be invested over the next few months. 



The brutal decline in the US Dollar has favored commodities, but now the US Dollar has a good chance of bouncing back a bit.  Central banks are all likely to start lowering rates and this will help dampen these dramatic increases in world currencies versus the US Dollar.  The currencies of the two top commodity producing industrialized nations are both pulling back after gapping lower off runaway peaks.  This works against commodity prices.
Posted by HeadlineCharts at 20:17:35 | Permanent Link | Comments (0) |

Tuesday, November 27, 2007

Wednesday Market Momentum Breadth Volume

Disclaimer: All charts and comments are intended for education and discussion purposes only. No investment recommendations are being offered. Please do your own research and take responsibility for all investment decisions that you make. Questions and comments related to this post are encouraged.  | MON - Sector Strength | TUE - Interest Rates | WED - Market Breadth | THU - Commodities & Currencies | FRI - Market Sentiment | SAT - Bullish Percents | About | contact: HeadlineCharts@gmail.com |


Today's market advance offered some hope that the relentless price declines may be nearing an end.  Now we need follow through starting with another rally tomorrow.  Despite today's strong rally, new highs were only 20 and new lows a whopping 302.  Substantial distribution of shares is still taking place.

The ratio of upside over downside volume has spiked off substantial lows, while market prices have pulled back to important support.  This has been a jumping off point in the past for the market, and perhaps it will be again.



Above is a terrific chart sent to me by a reader of this blog (thanks!).  I like the looks of this.  It appears a bottom is forming.   A buy signal occurs when the MACD histogram crosses above the zero line.



Here is another look at a similar chart.  The AD needs to start trending higher by breaking above the down trendline. 
Posted by HeadlineCharts at 19:22:54 | Permanent Link | Comments (0) |

Monday, November 26, 2007

Tuesday Interest Rates & the US Dollar

Disclaimer: All charts and comments are intended for education and discussion purposes only. No investment recommendations are being offered. Please do your own research and take responsibility for all investment decisions that you make. Questions and comments related to this post are encouraged.  | MON - Sector Strength | TUE - Interest Rates | WED - Market Breadth | THU - Commodities & Currencies | FRI - Market Sentiment | SAT - Bullish Percents | About | contact: HeadlineCharts@gmail.com |


Rates have shifted dramatically lower which is not what we want to see.  Fixed income prices are surging and rates are collapsing.  Money is flowing out of equities and moving into the safety of Treasuries of all durations.  Fed Funds are almost certain to follow the yield curve lower despite the low US Dollar.



The weakness of the US Dollar continues to amaze.  But rates will probably be coming down around the world which will probably support at least a bounce in the US Dollar. 



The broker /dealers don't look like they are ready to lead this market higher anytime soon.  But the pullback in prices is to an important support level, and the indicators are oversold which means we may get some relief from the relentless selling.  There isn't much support below though if this index breaks down.
Posted by HeadlineCharts at 19:51:43 | Permanent Link | Comments (2) |

Saturday, November 17, 2007

Saturday Bullish Percents

Disclaimer: All charts and comments are intended for education and discussion purposes only. No investment recommendations are being offered. Please do your own research and take responsibility for all investment decisions that you make. Questions and comments related to this post are encouraged.  | MON - Sector Strength | TUE - Interest Rates | WED - Market Breadth | THU - Commodities & Currencies | FRI - Market Sentiment | SAT - Bullish Percents | About | contact: HeadlineCharts@gmail.com |

HeadlineCharts will be on vacation Thanksgiving week.  Special thanks to all of you who emailed your comments and suggestions about this blog on its one-year anniversary.  Some minor changes are being planned for the year-ahead.


The ECRI Economic Cycle Reseach Institute continues to report a serious slowdown ahead for the economy, but have not declared a recession ahead.  Their future inflation gauge continues to point to low levels of inflation.  I highly recommend a subscription to the ECRI.  Recommended blogs are Declan Fallon, VIXandMore, GoldStockProphet, Millionaire Now, Kevin's Market.




The major indexes stabilized this week, and the week included one huge up day on Tuesday.  But the underlying market not shown by the major index levels was steady, punishing distribution.  This was revealed by the very negative new highs /new lows and the continued downward shifts in the bullish percents.

The good news though is that the sectors that undermined the market in the first place, financials and discretionary, have stabilized at their lows, at least temporarily.  Now the leading sectors that ran up too high have pulled back significantly as well, and this includes tech, materials and energy.  Only the bullish percents of the traditional late-cycle, safe-haven sectors remain above the 50% mark such as utilities, consumer staples and large-cap blue chips.

I don't know how much longer the 5-year bull market can remain intact, but with the bullish percents at these lower-risk, pessimistic levels, and with the favorable seasonal period, the help from Fed liquidity, the huge corporate buybacks, etc. ... I like the chances of a post-Thanksgiving rally into the new year.  But I'm waiting on the sidelines until there is a signal that the market has bottomed and is ready for the next push higher.  A signal such as an IBD follow through day.

After the new year, there is plenty to worry about.  I am starting to read concerns about excesses in the emerging markets, and a serious slowdown developing in Europe.  Also worrisome is the China stock market discussed in Business Week magazine. 





Posted by HeadlineCharts at 09:12:03 | Permanent Link | Comments (1) |

Friday, November 16, 2007

Friday Market Sentiment

Disclaimer: All charts and comments are intended for education and discussion purposes only. No investment recommendations are being offered. Please do your own research and take responsibility for all investment decisions that you make. Questions and comments related to this post are encouraged.  | MON - Sector Strength | TUE - Interest Rates | WED - Market Breadth | THU - Commodities & Currencies | FRI - Market Sentiment | SAT - Bullish Percents | About | contact: HeadlineCharts@gmail.com |


If only the newsletter writers would capitulate and get bearish, the sentiment stage would be set for the next rally.  But these newsletter writers are stubbornly bullish while the individuals, bloggers and low-risk folks have all thrown in the towel on this market.  The newsletter writers are the more important group and they need more time to be pulled down into the bear camp.  Sentiment has improved considerably, but unfortunately not enough.  Sentiment is still working against higher equity prices from a contrarian point-of-view.



The chart above provides another view of the newsletter writer's sentiment survey.  The trend is in the right direction for both the bulls and bears, but still has quite a ways to go before approaching the prior levels that work in favor of higher stock prices.



Above is a chart of the equities-only put/call ratio and it has moved up nicely to a level that shows fear towards equity prices.  It has taken awhile for this spike in the ratio to occur, and based on the past spikes the ratio could zigzag a bit at these high levels before the market bottoms out again.  But this chart looks favorable towards the market because investors are finally beginning to get concerned enough to hedge their positions or get downright bearish with puts designed to profit on declines.
The survey information above can be obtained for free via the following sites.  Investor's Intelligence is from Market Harmonics.  Individual Investors is from aaii.com.  Low Risk is from lowrisk.com.  Birinyi Bloggers is from Ticker Sense.  For additional information about market sentiment, I recommend a blog by Brent Leonard.


Sentiment analysis is an important component when following the markets, and is considered a “contrary” indicator.  Contrary because if too many people are bearish then there aren't enough sellers left, the balance tips to buyers, and the market starts to advance.  If too many people are bullish, most funds are already invested, the balance tips to sellers and the market weakens.  One way to determine if investors are bearish or bullish is by taking surveys and tracking at what levels these polls indicate investors are at the extremes of bearish or bullish sentiment.


Keep in mind, sentiment analysis is not a science and only provides very general information.  Sentiment is not a signal to take action, but provides background about the current state of the markets.  For instance, there have been many occasions when bullishness reached high levels well before the market started to weaken.

Posted by HeadlineCharts at 19:46:34 | Permanent Link | Comments (0) |

Thursday, November 15, 2007

Thursday Commodities & Currencies

Disclaimer: All charts and comments are intended for education and discussion purposes only. No investment recommendations are being offered. Please do your own research and take responsibility for all investment decisions that you make. Questions and comments related to this post are encouraged.  | MON - Sector Strength | TUE - Interest Rates | WED - Market Breadth | THU - Commodities & Currencies | FRI - Market Sentiment | SAT - Bullish Percents | About | contact: HeadlineCharts@gmail.com |


Maybe Tuesday's big rally day was a false signal.  The market is still undergoing significant distribution as shown by the large number of new lows on both major exchanges.  However, I still think we are nearing a bottom based on a number of technicals including the oversold bullish percents.  IBD wrote today that Tuesday's rally lacked the volume to qualify as an initial rally day.  This type of call is what they do best so I will gladly defer to them.

The commodities are unchanged from last week in terms of the 40-week moving average.  Most are in uptrends although there has been some weakness among the commodities where prices were extended such as oil and gold.  The currencies showed similar moves with the way oversold US Dollar finally bouncing and the overbought Euro, Pound, AU-dollar, NZ-dollar and CN-dollar all pulling back from their extended levels.

The Euro zone is weakening and lower rates are expected.  This will help the US dollar so it may be a while before stocks tied to currency weakness lead the market like they did from mid August to mid October.  For the next leg up I like defense, computer tech, bio tech and alt-energy tech.

The Market Vane Commodity Sentiment survey is unchanged from last week at 64% bulls which indicates continued bias in favor of commodities, but not as hot as last winter and spring.
 


I really like the chances for the US Dollar to rally from the current level, at least up to the 40-week... which is also major resistance.  Oil and gold are likely to pull back and it isn't clear whether that helps or hurts equities at this point.  But if there is a rally, a pullback in oil would seem to favor tech.



I'd feel a whole lot better about the world economy if copper prices hold above this up trend line.  Now that oil and gold have corrected, this is the commodity to watch. 

Posted by HeadlineCharts at 19:30:10 | Permanent Link | Comments (0) |

Wednesday, November 14, 2007

Wednesday Market Momentum Breadth Volume

Disclaimer: All charts and comments are intended for education and discussion purposes only. No investment recommendations are being offered. Please do your own research and take responsibility for all investment decisions that you make. Questions and comments related to this post are encouraged.  | MON - Sector Strength | TUE - Interest Rates | WED - Market Breadth | THU - Commodities & Currencies | FRI - Market Sentiment | SAT - Bullish Percents | About | contact: HeadlineCharts@gmail.com |


IBD states that when a market is bottoming and beginning a new uptrend, it will start with a strong, high volume turnaround day like we had yesterday.  Then the market will generally pause and consolidate for 2-3 days on light volume before making a follow-thru day.  The follow-thru day is the signal to get back into the market.  In other words, so far so good and now we wait for that confirmation that the new uptrend has begun.  Another sign that the market is finding support is the turn up in the bullish percents for the two major exchanges as shown in the chart above.



I like the looks of this chart as well.  The new lows were still too high today showing there continues to be underlying distribution taking place.  But the chart above shows that all this selling has brought this indicator down to a level where it is likely to stabilize.  This indicator is now at the point where it is likely to experience a little sideways up-and-down before starting a trend higher.  In other words, the market is probably at the point where distribution starts to give way to accumulation.



There was lots of talk today that yesterday's rally was just short-covering and an extreme oversold dead-cat bounce.  Well, it may have been, but then on the other hand that is generally how every new intermediate uptrend begins.  It is also amazing how the news also brightened like the dark clouds had finally parted and the sun was shining for the first time in two weeks.
Posted by HeadlineCharts at 21:30:57 | Permanent Link | Comments (0) |

Tuesday, November 13, 2007

Tuesday Interest Rates & the US Dollar

Disclaimer: All charts and comments are intended for education and discussion purposes only. No investment recommendations are being offered. Please do your own research and take responsibility for all investment decisions that you make. Questions and comments related to this post are encouraged.  | MON - Sector Strength | TUE - Interest Rates | WED - Market Breadth | THU - Commodities & Currencies | FRI - Market Sentiment | SAT - Bullish Percents | About | contact: HeadlineCharts@gmail.com |


Short-term rates declined quite a bit since last week which is a sign of very serious distress in the equity market.  But this was a huge rally day and rates confirmed the equity rally by rising well off the distress-level lows.  Now we need to see follow-thru in both equities and rates.



This was a very encouraging day in both the equity and bond markets.  But one day isn't enough to jump back in with both feet.  The markets need to show follow through.


The US Dollar was so oversold that a bounce had to happen.  Also, rates in the UK and Europe may be headed lower so we may see some dollar strength for a while as it climbs back up towards the moving averages.  This means energy, materials and gold may not lead the next leg up in the stock market.  Instead, industrials along with computer, medical, alt-energy techs may be the leaders.
Posted by HeadlineCharts at 20:09:46 | Permanent Link | Comments (0) |

Monday, November 12, 2007

Monday Sector Strength

Disclaimer: All charts and comments are intended for education and discussion purposes only. No investment recommendations are being offered. Please do your own research and take responsibility for all investment decisions that you make. Questions and comments related to this post are encouraged.  | MON - Sector Strength | TUE - Interest Rates | WED - Market Breadth | THU - Commodities & Currencies | FRI - Market Sentiment | SAT - Bullish Percents | About | contact: HeadlineCharts@gmail.com |


I don't have much time for market analysis tonight, but I thought it was important to view this spreadsheet of where the indexes are in relation to their moving averages.  I've marked the indexes that are below the 80-week in red.

The good news is that the banks, S&L's and other financials have held their current levels for two days.  It's is a bullish sign because they won't pulling the general market down.  The bad news is that tech, materials, energy and gold are all in sharp declines, and there is probably more to go.  But the chances are good that another bottom will be forming soon and another buying opportunity.

Posted by HeadlineCharts at 21:35:00 | Permanent Link | Comments (4) |
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