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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This is the big story of the week.  Bond rates broke out leading the US Dollar higher, and pushing down oil and other commodities.

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Here is my favorite chart of my two favorite commodities.  They offer the best competition to oil without the global warming emissions.  Natural gas is entering its weak season so I am keeping some money available to invest when it pulls back.  I already own enough of the uranium ETF for now, but may add to it if and when it breaks this downtrend.

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The pullback in grain prices is working in favor of livestock prices.  I've sold most of my commodity ETFs like DAG, but still hold the COW ETF for the long run.  And planning on buying back DAG at some point later.

The industrial metals have fallen below the 40-week.  That is not a good sign for commodities in general and maybe for global growth.  Hard to know how much of the metal weakness is due to the softening economy versus the bounce in the US Dollar.  Either way, it is definitely an important development and is a warning signal.

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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'm reading a lot of bearish comments lately.  I agree the market is correcting despite the rebound over the last couple days.  But the new lows are behaving well.  So far, I think 10% cash is the appropriate cushion against the potential downside. 

Bond rates broke out today.  Sure are lot's of cross currents in the market at the moment.  I'm a bear on bonds and today helped to support that view. 

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I'm watching the financials as an indicator for the broader market.   It looks like an inverted head and shoulders could be developing which would support the market.  If so, I would expect the index to find support soon at around $24.  If we get lower lows, we'll probably have to cut back on long positions.

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The bullish percent of the financials dipped under the 50% level confirming the downtrend.  Now we need to see that this indicator can make a higher low, and it would be nice if it could find support around 40%... or at least hold above 30%.  If this indicator dips to the old lows under 20% then I would find it hard to believe that the broader market will have much upside.  Part of the bull market thesis is a recovery developing in financials, and this indicator will help measure whether the recovery is for real.

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Advance /declines are not my favorite indicator, but when you step back and look at the long term view its worthwhile.  The AD has followed the brutal selloff in Q108 lower, but trailing prices lower.  In the late 90's, the AD led prices lower.  Seem like it is an indication of underlying strength remaining in stocks. 

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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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Two new blogs worth checking out.  Skill Analytics and Reactive Chartist.



I recently purchased a small position in a Treasury Bear fund.  Rates look to me like they want to go higher based on the chart above.  Of course, if the economy tanks then rates are headed lower.

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Here is the same chart, but using the new Renko chart feature.  I like the looks of this.  The TRIX is showing higher lows while the rate was forming a double bottom for a bullish divergence.

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If you are the old-fashioned type, you'll love this chart too.  The P&F is showing a very nice sell signal for 30Y bonds.

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You also might want to dust off your bull market US Dollar fund.  If rates are headed higher, then the US Dollar may actually pick itself up off the bottom.   Commodities are correcting again, perhaps as an advance signal that the US Dollar has seen its lows for a while.  It all seems to fit together.

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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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'He [Buffett] said the presidency is not unlike running a business. "They say in the stock market, buy into a business that's doing so well an idiot could run it, because sooner or later, one will.  The US is sort of like that." ' [AP, May-22-2008]
 

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  ECRI Recession Watch:



If you base your major, life-altering, financial decisions on squiggly lines, then you'll love this new chart from ECRI.  While the general economy continues to sink, the leading indicators are showing signs of strength.  These are smoothed averages, and unfortunately, the weekly leading data has dropped two weeks in a row.  I'd say that the price of oil has cut off the slight rebound in the economy, and we are back to a no-growth situation. 

Trim Tabs keeps sending me their emails even though I think the trial is over.  Their data is terrific and the commentary is even better.  Yesterday's email was a bit odd though.  They ranted a bit about the possibility of oil price manipulation.  They are recommending that governments of oil consuming nations begin shorting oil futures to drive down the price.  These guys are insiders.  If they think prices are being manipulated, then there might be something to it.  But, as interesting as it is, I'm not seeing how any of it helps me with my investment decisions.

Trim Tabs keeps a very close eye on tax receipts and payroll withholdings with the idea that the real driver of higher stock prices is liquidity and employment.  This past week they noted a serious drop in withholdings but they suspect some sort of government collection problem.  However, they also note a drop in employment ads, weak company buybacks, and no cash takeovers which leaves them neutral on the market and in cash until they can sort out what is going on. 

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Enough about Trim Tabs.  As for HeadlineCharts, there is a cash cushion of 10% that will likely be deployed in the best areas of the market if the pullback is substantial enough and the breadth indicators behave.  Right now, natural gas and coal seem like the best place to be if the price is right. 

Ken Tower has read this market perfectly.  He went bullish at just the right time, went neutral a month later but remained invested until this past Monday when he issued a sell and took profits and hedged.  Now he is looking for a normal pullback to the lows of the trading range.  He doesn't see this current selloff as serious but remains cautious about the longer term since he thinks the credit crisis needs a lot more time to unwind than most people think.

I forgot to pick up IBD today so I'm not sure if they have changed their market outlook.  If you know, please send me a note.

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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 IBD index took a big hit this week signaling that even the best stocks are under pressure.  However, most major indexes remain above the important 50% level despite some serious selling. 

Financials were the worst hit by the selling, but they also remain above 50%.  I don't expect that to last, and before this correction is over I would expect financials to at least touch the 30-40% range.  The test will be to see if the financials can remain above the 30% level as a sign of underlying strength and a bullish signal on the general market.

There was a shift back to the defensive groups this week, utilities, healthcare, staples, and as you can see these groups suffered no damage in the bullish percents.  I took a position in healthcare this week because it looks like this group may have bottomed out for now. 

I'm loving the strength in timber-related stocks.  This group was very oversold and I took a large position as a value bet.  Nukes and Uranium are perking up with the record prices in oil.  I've owned these for a while and plan to lock them away in the portfolio for a long time.  However, I'm also noting a need to be cautious in this group as the disaster in China reminds.  There were some headlines that the government was trying to make sure there were no radioactive leaks... if there were, would we be told the truth?

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As mentioned, keep this chart on the radar.  We need to see a higher low in this indicator to continue to believe in this bull market.

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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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Based on what I see on the news this week, the world really noticed out-of-control energy prices.  A pullback in energy commodities and shares is likely which I view as a buying opportunity.

I was surprised by the rally in Treasuries today, and impressed by the restrained level of new lows.  These levels are still below where they were during spikes in the previous price uptrend which I think is bullish for the market longer-term.  So far this selloff looks to me like we are headed towards a normal correction in prices where buying returns when prices pull back into the base.

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The bloggers got scared out of the market quickly, but the individuals and newsletter writers are holding strong.  These surveys are neutral towards to market at current levels. 

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This chart does a better job at the moment showing where sentiment stands, and the trend which has been off extreme lows headed higher which is bullish.  These levels indicate there is more room for this market to run before it tops. 

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The chart shows the short-term sentiment level.  The 10-day put/call average is at a level that often indicates a short-term correction is likely, probably 3-4 weeks.

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The insider sentiment remains favorable, although it has fallen off from the highly favorable levels a couple months ago.  I've added the Vickers and Investor's Intelligence data.  Investor's Intelligence continues to believe the insider data favors stocks in the weeks 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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I just got a Trim Tabs email.  They have decided not to short the market this week because the economic weakness isn't as bad as they previously thought.  Well, its good to know the major players in the market are as confused and easily whipsawed as the rest of us.  On second thought, we already knew that.

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My two favorite commodities.  Nat Gas is ready for a breather, and that might be a buying opportunity.  Uranium keeps teasing with signs that it wants to break out.  Let's see if it can break above this downtrend line.

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This is a nice looking chart.  This ETF could pull back here and would also be an opportunity.

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Another favorite commodity.  I've been watching this chart for some time and it has finally turned around nicely.

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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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So should we be buying bonds or shorting them?  If you are a buyer, you're thinking the recession is only getting started, rates are headed lower and you need safety from falling stock prices.  If you are a seller, you think the economy may muddle along, but you are quite concerned about commodity-inflation and rising rates ahead.  That's my view and I took an initial short bonds position today.  Although my confidence level is low... read on.
 
As for the stock market, I'm reading lot's of negative comments that basically state we've hit the top of this intermediate cycle and prices are headed lower.  But so far my charts show the new lows haven't yet signalled a serious selloff ahead, and the selling on Tues and Wed seemed to make sense after a nice run up... and with the SPX failing just under the 200-day.  I think a pull back to the 50-day or maybe the 50% retrace level is reasonalbe and isn't necessarily ringing alarm bells as long as the market internals aren't too bad.

What has me quite worried is the report from Trim Tabs that the economy has suddenly stalled again.  Not that they were seeing much strength in the weeks prior, but tax receipts, withholdings, job ads, buybacks, insider buying were all pointing to a stealth economy firming up.  Now this week all that has dropped off a cliff according to Trim Tabs.  They were considering going 100% long last weekend, but they are now considering going 50% short this weekend.  Quite the reversal for an investment strategy.  More like a day trader which is not their style.

ECRI makes the excellent point that indications were that the recession would be mild but would last longer than many thought.  Now with oil spiking, despite today's reversal, ECRI points out that it is a jolt to a very weak economy that could send it into a more severe recession.  If that's the case, the future for commodity prices and bond rates is quite uncertain, because a severe recession is probably capable of sending oil prices lower which would mean lower bond rates as well.

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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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If you are in a panic about oil and gasoline prices, I'm with you.  I know we all have to adjust to higher and higher energy prices ahead, but things are getting a little out of control.  The short-term overbought condition of the market combined with these higher energy prices is not helping the uptrend.

My free short-term subscription to Trim Tabs is close to running out, and I don't have the $50,000 it takes to be a subscriber.  But I just got an email notice today that they are getting close to going to all cash after just saying two days ago they were considering going 100% long.  Now that's a whipsaw!  Apparently tax receipts have declined to a level where the anemic .5% growth is probably down around 0%.

Adding to the concern is that Ken Tower went to a short-term sell this morning before the open... good call per usual.  He doesn't like the complacency showing up in the put/call ratio among other things.  So it may be time to consider hedging some positions.

Too early to panic though if you are strictly a chart reader and don't drive a car or read investment advice.   The failure of the SPX just under the 200-day can't be a surprise to anyone, and we have had a very nice short-term run which could easily use two or three weeks to consolidate.  Combine this with the sell-in-May nerves, etc., and today's selling makes sense. 

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The new highs remain above the 50-level and the new lows don't reveal a lot of underlying, hidden weakness ... at least not in the NYSE.  And the bullish percent held nicely.  Based on these indicators, I'm not seeing the start of some big turn in the market.  I must admit though, that Trim Tabs report has me a bit concerned.

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Rates look like they are headed higher to me.  I may invest in a bear bond fund when this MACD hits the low which may be near the 4.4% level. 

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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 future economic growth index had a slight decline this week, but the smoothed trend is off the lows and pointed higher even though it is at a weak level that is similar to levels in past recessions. 

The ECRI future inflation gauge ticked lower as well.  It is within the area that indicates reasonable levels of inflation ahead.  I'm sure you are laughing at that, but honest that is where it stands.  I think the commodity inflation is being offset by very powerful defationary forces such as inexpensive labor producing finished goods, lower home prices around the world and low rates in the US, Canada and Japan. 

Trim Tabs was shaken out of their very bullish stance on the market down to a very cautious level a couple weeks ago.   Now they are seeing a rebound and are back to a fully invested but unleveraged position.  Not sure how much longer I'll have Trim Tabs reports.

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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.

Not a single shift lower for the bullish percents, with the market broadening out very bullishly and plenty of stocks still at buy levels.  It is very bullish my opinion to now see all the major indexes following the market higher such as the small caps, NASDAQ, AMEX and Wilshire 5000.  Granted the leaders are now overbought and can't continue to support the market, so these other groups will have to carry the load of pushing the market higher, and that seems to be happening impressively.

The Canadian Stock index is making its move.  The index was down along with a pullback in the Canadian Dollar due to aggressive rate reductions that generally matched the USA.  Now both the Canadian equities and the dollar appear to be gathering strength.  Canada's rebounding strength along with the fact that it is a huge commodity producer inspired me to take a long term position in EWC.

Another intriguing foreign market is Japan.  I'm beginning to hear more bullish comments about a rebound there, but I haven't yet looked into it and don't have a position.  Japan's foreign commodity dependence is a concern though.

The high quality, high growth IBD stocks are over 80% P&F bull signals which I take as a strong confirmation of the trend in equities rather than an overbought and ready for a correction signal.  I'm not buying this group though, and prefer to stick with funds and ETFs along with a longer term buy and hold strategy.

It is nice to see the alt energy group and pollution control groups finally headed higher.  They've remained at a low bullish percent level despite their relation to the price of oil.  Perhaps it was a contrarian signal for higher oil prices that people weren't yet buying alt energy.  Nuclear stocks are starting to strengthen a bit again.

The defense group is one of my favorite long term secular industries and it has gathered strength again.

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I got shaken out of my intermediate term holdings too early based on some spikes in the new lows.  Now the new lows have settled down, the new highs are strengthening and the bullish percents are confirming so I'm back to bullish with money deployed again.  My major concern is the overhead resistance of the 200-day for the SPX, and the gap resistance overhead for the NASDAQ.  Also, although the NASDAQ has improved, the new highs and new lows are still inverted which doesn't usually occur in an uptrend.

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As I mentioned, this group is showing some strength.  I like the bullish divergence, the W pattern, the down trendline break and the break above the first level of resistance.   I keep reading about large numbers of nuclear plants being built or planned around the world, plus I'm sure the existing plants all need upgrades after years of neglect.  These stocks had big runups, then huge selloffs.  So they are not without volatility, meaning a dollar cost strategy for me.

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