HeadlineCharts.blog.com

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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 |

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The ECRI leading index of residential real estate prices has started to firm.  It takes 6-7 months of strength in this leading indicator before ECRI will change its view on real estate from negative.  I'm sure it will include a warning for caution towards real estate regardless of how the indicator performs considering the seriousness of the current world wide conditions.

The latest comments from Mortgage Matters offer more encouragement.  Some of their comments are pasted below, dated Mar-31-2008. 

"The laws of economics really do hold. Sales of existing homes rose to a 5.03 million annual rate in February, an unexpected 2.9% increase from January's revised 4.89 million annual rate, according to the National Association of Realtors last Monday. The news flew over the heads of the putative experts, who were calling for a drop to 4.85 million.

So why do the laws of economics hold? Increased sales are being spurred by lower prices. The median existing home price was $195,900 in February, down 8.2% from $213,500 in February 2007. Some of the same experts lamented the drop in price, but shouldn't have. Falling prices improve affordability and encourage people to make purchases, which is exactly what's beginning to occur.

The same holds true on the new-home front, where the median price decreased 2.7% to $244,000 and sales dropped 1.8% to a 590,000 annual rate, which, though a decrease, still beat the consensus estimate by 15,000 units. Just as important, the number of new homes for sale at the end of February dropped to 471,000, the fewest since July 2005, indicating builders are making headway in clearing the inventory glut. (Lower prices also motivate suppliers – builders in this case – to cut production.)

Lower prices have also stimulated mortgage activity. The Mortgage Bankers Association reported that its four-week moving average for the seasonally adjusted market index is up 11.3%, with the purchase index up 3.1% and the refinance index up 18.3%, thanks to recent Federal Reserve actions that have shored up the mortgage market by allowing the 30-year fixed-rate mortgage to remain below 6% and the 15-year fixed-rate mortgage to hang around 5.5%."

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The group to watch now are the mortgage lenders.  The decline in prices has been dramatic to say the least.  The home builders and REITs are holding above the 50-day, but the lenders are not.  This group probably needs to retest, hold then bounce back above the 50-day and remain above.  This, combined with continued strength in the other two groups, will be the signal that the worst is over.  I'm not buying these groups, but watching as a market indicator.

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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 |

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Above is a chart that I forgot to include in the sentiment post.  It is of the 60-day put /call moving average.  Everytime I show this chart I get a comment from someone questioning it.  This indicator didn't work at all last fall, but in general it gives decent signals.  The indicator has recently exceeded the prior peak and this is usually just about when it reaches a point that corresponds with a low for the market.  So it is currently giving a buy signal.

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This is a real good looking P&F buy signal.  The downtrend has been broken with two double top buy signals.  As long as prices remain above the new uptrend support line, the buy signal remains in effect.

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Red is a column of O's in a downtrend, blue is a column of X's in an uptrend.  Below 30% is oversold, and above 70% is overbought.  Yellow is a shift down, green is up

The bullish percents are looking good.  They declined to extreme levels in January and then remained above those levels during the recent market retest for a solid bullish divergence.  Now many of the major index bullish percents have issued bull alert and bull confirmed signals with very good field position.

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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 |

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I reduced the number of analysts that I am following.  I'm new to Richard Band, but you probably read Mark Hulbert's review of his newsletter at MarketWatch and he seems like someone to pay attention to.  I basically agree with IBD, Tower, and Pring who are bullish over the coming weeks, but after that who knows.

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With all the bad news, it seems like a risky time to get bullish on the market.  But with prices barely above the long-term trendline and 50-month average, there is a stop out point close below which limits risk.  Fortunately, prices never got excessive during this bull market the way they did prior to the 2001-2002 bear. 

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The individuals have been negative towards the market for months.  Their timing has been excellent.  Now they have turned bullish probably just at the right time.  The bloggers have swung back and forth from the extremes not knowing when to buy or sell.  The newsletter writers are a stable bunch.  Their sentiment tends to move in small steps which provides us plenty of time analyze their survey results.  Their sentiment is still extremely bearish but has started to move in the bullish direction.  From a contrarian point of view, these survey results are favorable towards prices.

Here is a quote from Jim Mikka’s at The Sudbury Bull and Bear Report, "...one should note that, while a plurality of bears over bulls is a favorable omen, officially there is no buy signal until the bulls begin to grow at the expense of the bears.”   I never read this before but I think this has started to happen.

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These charts show the bulls increasing and the bears decreasing.  According to Jim Mikka, this is a buy signal, if I interpret his notes correctly.  This is an excellent level of sentiment for a sustained rally to develop.

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Corporate insiders continue to be buying stocks in their own companies at a pace that is extremely bullish for higher prices ahead.

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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 |

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No movement this week for any of the commodities, indexes or currencies.  No new highs either.  I'm continuing to average into precious metals, energy, alt-energy and agriculture over the coming months, but will be avoiding industrial metals. 

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If you like the clean energy industry, then this is the time to get interested.

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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 |

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IBD is the first to admit that their "confirmed rally" signals only work 70-80% of the time.  Most of those false signals undoubtedly occur during bear markets or severe corrections like we're experiencing now.  I find it reassuring to have a reliable source like IBD offering well considered advice on the market.

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The market pullback over the last couple days seems like healthy technical behavior as the SPX broke out above resistance and is now retesting the breakout.  The excellent level of new lows confirms that the decline has been a pullback in a fresh uptrend.

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More evidence that the recent declines are a short-term, overbought retrace in an intermediate uptrend... the bullish percents on the two major exchanges ticked up yesterday and again today while prices declined.  That is a bullish divergence.  Its been seven days in a row that the bullish percents have increased, and from excellent field position.  The NASDAQ bp has now broken slightly above the prior high.

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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 |

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I know I keep saying this, but if this recent low in equities does turn out to be a pullback within the bull market that started late 2002, Bob Brinker will really deserve a lot of credit.  He hasn't budged a bit over the last seven months in his recommendation to remain fully invested.

Today there were actually more new highs than new lows on the NYSE, and rates continued to improve confirming the technicals shown on Monday.

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Today I filled out my trading account and the cash in my retirement account with a position in the SPX.  1340 looks like an important support level.

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Ken Tower is a point & figure specialist, and I suspect he really likes the looks of this chart.  I know I do.  (Tower designed the point & figure charts for StockCharts.com).

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I wonder if we will ever really know just how dire and close to collapse the financial system was last week.  I'm still amazed when I see that the TBill rate went all the way down to .2%.  That is an extreme in capital preservation, and if I were smarter, maybe I would have recognized it as a signal that the bottom was in.  The prudent course, though, was to wait for the rate to bounce back up signaling an ease in the emotions.  Nobody knows for sure if we've seen the bottom of the credit crisis, but we can use this rate to help us monitor the situation.

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Above is the broader view of the TBill rate.  The current crisis had people more concerned than the dotcom collapse and the Sep-11 attacks.

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Top quality corporate bonds are now bouncing back as well, although there is still a way to go before the ratio is back to its normal level.  The recent sell off in the 10-year also indicates easing in the crisis.  Money coming out of bonds is likely to benefit stocks since commodities are now out of favor, at least for awhile.

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The US Dollar is widely followed at the moment, but perhaps what people aren't paying attention to is the fact that the bounce in the dollar may be benefiting the US stock market versus other markets.  Let's see if the US /World equity ratio can hold above the moving average. 

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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 |

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HeadlineCharts.blog.com has finally switched from bear to bull.  Today's new lows were contained and the Tbill rate rebounded.  Combine these technicals with the 'market rally' signal by IBD and the bullish stance by Ken Tower, and you have a decent chance of higher prices ahead.

You are probably wondering what happened to the Saturday Bullish Percents.  I couldn't post because I lost my spreadsheet to a computer virus on my lap top which now has to be reimaged. 

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I just can't bring myself to buy financials with all the unknowns, and I have no confidence in discretionary stocks in this environment.  I'll probably fill my trading account with index ETF's instead. 

Will the lower channel support hold for the energy /financials ratio?  This should be an interesting test.

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Before getting too excited about financials, check out the bullish percent which has already surged to a level that is close to overbought.  Also, let's not forget that the ECRI has now projected a recession.  I'm leaving 10-15% cash in my retirment accounts to use to buy an inverse ETF in the event that this rally is short lived.  And I'll also be ready to cash out of any trading account investments if the market starts to falter.  Being cautious and conservative seems like a good idea despite the nice market signals.

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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 |

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Some bad news today.  The ECRI threw in the towel and declared that their forward-looking indicators "unequivocally" point to recession.  They had been on the fence for so many weeks I was starting to take for granted that there wouldn't be a recession.

Their future-inflation gauge ticked lower indicating low levels of inflation ahead, consistent with most of the past recessions.  If ECRI is right, this means that the recent selling in commodities marks the peak for this cycle.  The markets have now completed a classic intermarket pattern where long bond rates are the first to fall, then the stock market peaks and sells off, then commodities complete the pattern by peaking and falling as well.

We are now looking for the early signs that anticipate an end to the economic downturn... in other words, bond rates need to start climbing.  There are some early signs that the bottoming process has begun, but how long that process takes is unknown.

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Above is the weekly sentiment surveys.  The bloggers couldn't stand the heat and retreated again.  They are an emotional bunch and could be reversing just when they were finally on the right track.  The individuals have been the best at calling the market for quite some time, despite their reputation for misunderstanding the markets.  Now their sentiment has ticked up from an extreme low.  The newsletter writers have really been sad and depressed about equities these last few weeks.  Their sentiment has rarely been so negative towards the market, and, from a contrarian point of view, this is quite favorable for stock prices.

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Above is the broad view of the newsletter sentiment survey from Martet Harmonics.  Too bad this chart doesn't go back 10 years, but I took a look at the 10-year chart provided by Investors Intelligence and these readings are right where they were in the post-911 spring of 2002, and near the spring-2003 invasion of Iraq.  For those with courage, good time to buy?  I'm not there yet, and I'm not at all happy about the recession call by ECRI, but still you have love these sentiment numbers as a contrarian investor.

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Talk about contrarian and courage.  Bob Brinker continues to maintain a fully invested view towards this market because his market timing model tells him so.  A piece of his timing strategy is this 60-day put /call moving average.  The long-term uptrend is primarily what Brinker looks at, and it tells him that there is skepticism towards the market, and he likes that.

I like it to, a lot, but I like to add that the peaks are good buying opportunities and the lows are signs of caution.  I've been really surprised for weeks that this ratio hasn't been surging as the market has been selling off and the news gets worse and worse.  Finally now the moving average is hitting new highs signalling that the time is near for new money to go into stocks.  I'd like it even better, though, if the average were above the upper trend line, considering the seriousness of the current market problems.

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These numbers have been terrific for weeks.  Insiders continue to love their own stocks which is very bullish.   Investors Intelligence considers insider buying a major element in determining when to buy stocks.  I'm a bit new to it and got interested by reading Brent's blog.  I don't know how much importance to give these numbers, but if II and Brent think it is important, then I'm paying attention too.

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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.  Birinyi Bloggers is from Ticker Sense.  For additional information about market sentiment, I recommend Brent Leonard's market sentiment blog.

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.

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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 |

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IBD flipped to a bull signal today.  It sure did seem like a good day in the market with lot's of technical evidence of strength.  The rate-sensitive sectors such as homebuilders, financials, discretionary all appear to be building solid bases, and some important large caps show breakout strength such as GE, Walmart and others.

I'm not ready to turn bull despite the fact that, like a lot of people, I try to follow the IBD buy signals.  I would hate to miss the early stage of a good rally in stocks.  It's just that new lows increased and were at high levels for both exchanges on a day when the market advanced on strong volume. 

Also, the TBill rate dropped yet again to .5% after touching all the way to .2% intraday... as in almost to zero.  Does that seem right?  And, the 10% drop in gold prices this week apparently gave bond investors confidence to buy the long end of the yield curve again.  So long bonds advanced while the equity market also advanced.  I guess money flowed out of commodities into both stocks and bonds. 

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This isn't news to anyone, commodities sold off since last week.  Some currencies have shifted as well.  The US Dollar was finally able to touch a low and bounce up while a couple currencies shifted below the 40-week.  Finally the currencies are coming back from their extremes.

We are entering the weak time of year for gold and silver.  Usually, the summer offers some really good buying opportunities.  Also, keep in mind that the last major selloff in gold resulted in a high consolidation that lasted a year or so.  I'm planning to dollar-cost average back into gold and silver over time and just hang on through the ups and downs.  I missed the big move at the end by taking profits too early.

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The CRB and the major currencies are highly correlated as shown in this chart.  The CRB is already about halfway to the initial target at the 40-week, while the currencies have a way to go.  I have some small commodity ETF positions in my retirement accounts that I plan to hold through the correction because I'm not at all sure where prices are going from here.  Will it be a quick correction until the US Dollar falters again, or a major correction after just about everyone on the planet has become bullish like the dotcom era?

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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 |

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New lows were a tiny bit lower for both indexes today despite the big selloff which is maybe a bit positive, but the level still seems too high.  The market action does seem to be part of a bottoming process.

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I keep thinking this rate can't go any lower, but it does.  We're looking for a little strength, and don't seem to get it.  Money keeps flowing into the TBill as a safe haven.  Not what we want to see.

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