Wednesday, December 30, 2015

Biotech ($BTK): At the end of the apex

Even though I recently called the top in natural gas a little early, it just meant that instead of selling when it was 'over-bought' you should definitely be selling when it's 'super-overbought.'

I've now noticed that the Biotechnology Index ($BTK) has now gone to the edge of the bearish ascending wedge meaning I am strongly advising entering a short/sell. The RSI and Stochastic indicators are both looking overbought at the moment along with general market so taking a short or selling profits right now seems advisable.

Tuesday, December 29, 2015

Daily News Roundup: Telling a woman to stay calm is as about as successful as baptizing a cat

Business & Finance:
Putin's rescue bank needs a rescue, at it's $18 billion (Bloomberg)
China Telecom shares drop as chairman snared in anti-corruption probe (The Telegraph)

Saudi's plan subsidy cuts to counter oil plunge (Bloomberg)
Asian mining stocks lead slide as China growth evaluated (Bloomberg)
China's November natural gas imports rise 3.5% (Platts)
Russia oil output forecast to rise despite low prices (Hellenic Shipping News)
South Africa's nuclear procurement process has begun (The Zimbabwe Daily)

Foreign Policy:
Oil price will end Saudi Arabian largesse (The Telegraph)

UK flooding cost of damage to top £5 billion (The Telegraph)

Art & Design:
The final year of production: 1958 Porsche 356 Speedstar (Uncrate)
Researchers create light-based microprocessor (Slash Gear)
The 'Golf House' of Buenos Aires designed by Luciano Kruk (Uncrate)
My Life in Monsters: Stop Motion Animation (The Awesomer)

Sunday, December 27, 2015

Natural Gas ($NATGAS): Let's relax now and take it easy

Natural gas has had a stupendous seven days or so. It recently bounced off of a long term line on the weekly chart and appears poised to be making a wave seven retracement to $2.60. Indicators such as RSI on the (5) and (14) week period were both heavily oversold. The MACD and TRIX indicators are also putting in higher lows and what appears to be a double bottom.
The daily charts are showing a different picture, however. Stochastics across most periods are already overbought (highlighted with red circles). The EMA(13) didn't stand a chance but it closed on the 23rd right at the EMA(34) where I expect this 'pause' will materialize into a retracement.
Last week's ATR level at $1.96 was also smashed showing we are in a new trend, however this weeks ATR levels are $2.30 (which seems a little far away) and $1.90, which I think will be support. I've also drawn into the RSI(5) indicator what I expect our fall to look like as a strong 'buy' signal needs to be produced in order for this trend to be validated. In the coming weeks it should descend into the heavily oversold area but as a higher low. If not, this new trend was merely a false start and we go back to waiting.

Friday, December 25, 2015

Volatility (VIX): It's hot out so I'm wearing shorts (only to $17.90)

VIX promises to be quite volatile for 2016 (I myself intend to be arbitrating this volatility with UVXY and SVXY). Long term, VIX has emerged from a very long and steep descending channel (visible in the weekly chart) which should already interest some people. Is an ascedning wave going to go in as part of a larger three wave down structure? Is a bottoming pattern going to develop? I am partial to the second school of thought now that we are in a positive interest rate environment and while fears persisted since 2008 of deflation the market had to appear to be rising which meant VIX had to be falling.This paradigm no longer applies in a post-interest-rate-rise market. Tremendous forces will be wanting to keep VIX low while equally strong forces will forcing a rise in response to what an increasing number of observers are calling a "fundamentally flawed system."
On the daily charts two patterns have emerged. The obvious one, and the one that is apparent on the weekly charts, is the condensing/pinching pattern. The second one that is a little more recent is the declining triangle pattern. The flat base for our triangle at $17.90 has emerged from lows put in during the last week of October and the first week of December. Declining triangles have a tendency to break upwards more often than not. In the coming week we will see if the lower diagonal support line holds at around $18.50 in which case a third hit will be made in our triangle meaning a later breakout can occur, although I would predict it won't a few weeks/months more as the triangle pattern is quite large.
There's a lot be said about being in cash for the near term as a lot of general market direction is being decided at the moment and VIX charts are a perfect example of this. Please be aware that weekly ATR trend reversal thresholds (the two pink lines) are at $16.42 and $22.82. The upper ATR trend reversal coincides with a breakout of the upper diagonal support.

Monday, December 21, 2015

Daily News Roundup: Couldn't find a big wall so I had to draw my Biggy small.

Finance & Business:
Yellen, bull markets and extinction in a 7 year stock rally (Bloomberg)
Bank of England hawk Martin Weale signals rate rises further away (The Telegraph)
"Weak China and cheap oil do not a happy forecaster make" (The Telegraph)

Permian Basin unprofitable at $30 (Zero Hedge)
Iraq sees crude oil prices rising on strong fundamentals (Bloomberg)
February crude plunges to $35.35 (Zero Hedge)

Foreign Affairs:
Coalition talks as Spanish vote is fractured (Reuters)
Spain's socialists will block Rajoy's first bid for new term (Bloomberg)

Earth, then and now (Design You Trust)
Art & Design:
Land of the Enlightened: Documentary of children in Afghanistan (The Awesomer)

A dog learns how to ride bus, take himself to park (Incredible Things)

Sunday, December 20, 2015

Silver (SLV): The Inception Wedge ("a wedge within a wedge")

I was quite impressed with Silver's moves on Friday and had previously called silver as a long/buy about a week ago, but I noticed something that gave me warm fuzzies inside when I looked at it's charts, and that's not because I just had a glass (bowl, really) of tequila and eggnog (the economy people, Bourbon is too expensive).

Looking at the near-term our recent gains compared to recent loses shows a lot of upside potential as silver is currently emerging from being quite oversold. The RSI indicator also shows a great 'buy' signal at the moment as a higher lower has just been put in. Concomitant with that my favorite MACD momentum indicator (and our Trix indicator incidentally) has also been showing a steady slow incline which more often than not snaps upwards quickly with prolonged moves like this.
What I think is happening is a smaller bullish descending wedge is being put in, it's just that we haven't yet seen the second lower high to give it it's 'wedge' shape (I'm really basing all of this indicators and a 'feel' the curves are giving me at the moment). However, a larger descending bullish wedge already began to emerge with lower highs put in on May and late-October already. Incidentally, my weekly chart has been showing a bullish declining wedge going back to 2014.

Thursday, December 17, 2015

Daily News Roundup: Success is like being pregnant. Everyone congratulates you, but no one knows how many times you got fucked.

International Affairs:
IMF head Christine Lagarde ordered to face trial over Bernard Tapie scandal (The Telegraph)
Putin threatens Turkish jets in Syria as spat escalates (Bloomberg)
Bashar al-Assad's crimes against humanity caught on camera (The Economist)

For Aramco, a pivot to Asia (Bloomberg)
Founder of Fanya, China's defaulting metal exchange, still missing since October (South China Morning Post)

Business & Finance:
Evans-Pritchard: Fed will have to reverse gears fast if anything goes wrong (The Telegraph)
TransCanada files new Energy East plan and puts cost at $15.7 billion (The Globe and Mail)
Hong Kong property market downtrend to last for two to three years as Fed tightening continues (South China Morning Post)
Martin Shkreli arrested for securities fraud (Zero Hedge)

Art & Design:
Microsoft announces HoloLens experience showcase in New York (Slash Gear)
Advice from cats on how to survive the holidays (Design You Trust)
 Presenting the Kuberg Freerider Electric Bike (Hi Consumption)
Star Wars shadow art (The Awesomer)

Wednesday, December 16, 2015

Energy: Short-term bullish entry and another double head-and-shoulders pattern on XLE

Seems odd that not only would the biotechnology/medical index and ETF's show a double head-and-shoulders pattern but now one appears to be developing in the energy sector.

First off, after the low three days ago a nice channel appears to have developed starting with the low in late August as the lower boundary and the highs of mid-August and mid-November as the upper boundary. Now we have our second tap on the lowermost support line and beginning of what I hope is the final second right shoulder. I earlier discussed the first head-and-shoulders pattern taking us to around $57.00 a few weeks back but now we can expect that to abort if this new pattern is bona-fide. Our stop at around $60.00 appears all too convenient.
The final shoulder should go to around $65.00 to $66.00 for our short-term projection. The really troubling thing to note though is that once the pattern has completed we can expect a fall to around $50.00 to $45.00 in the medium-term.

Since the first week of November we appear to have had a classic five wave down structure which should be followed now by a three wave up representing our move to $65.00 whereupon the down structure will resume. 

Tuesday, December 15, 2015

This is probably why the "market" will react "positively" tomorrow

I've noticed in the six or twelve month leading up to tomorrow that there have been a lot of false starts and therefore plenty of opportunity to gauge how the "proper market" will react to a rates rise. I think it also helps that there is already a little bit of "interest rate fatigue" at this point because this charade has been done so many times before you can't help but be a little cynical.

My personal belief is that the "false starts" have been in preparation for mapping by the powers that be, and in particular the hedge fund Citadel, what moves could be expected in a stock market with a rising interest rate. To save face the market has to react positively whether it's genuine or not as we finally cross the rubicon. A market collapse at this stage would represent a tremendous loss of confidence in the general system and so my bet is that we will have a general rise for all markets tomorrow and for the forseeable future.

Just by coincidence the $NYMO indicator is well outside the Keltner channel and recently scored below 80 which as points out has only happened 12 times since 1999. Very sharp market rises are what followed in all of those instances.

Monday, December 14, 2015

Daily News Roundup: "Everybody's a jerk. You, me, this jerk."

Foreign Affairs:
Bank of England inflation anxiety mounts with oil below $40 (Bloomberg)
South Africa gets third Finance Minister in a week (The Economist)
Turkey moves ahead with entry bid to reluctant European Union (Bloomberg)

Oil sinks as Iran vows more supply (Bloomberg)
Natural gas glut worse than oil (Oil Price)
China's nuclear sector on path to going global (China Daily)

Business & Finance:
World braces for decade's first rate hike (The Globe and Mail)
China to move sovereign wealth fund to New York (The Telegraph)

Adidas and Parley for the Oceans unveil running shoe made from ocean trash (Slash Gear)
Art & Design: 
Very rare car auction in New York Sotheby's (Gear Patrol)
 Guide to fine yet inexpensive cigars (Cool Material)
Ono reinterprets city cruising with electro e-bike (Design Boom)
Herzog & de meuron officially reveal plans for Chelsea's new stadium (Design Boom)

Guest Post: She'll be coming 'round the mountain....


Today we are going to review irrefutable evidence that a slow motion train wreck is already well underway across global markets, that will end with the last wagons on the train, the S&P500 index and the Dow Jones Industrials, disappearing into the abyss right after their immediate predecessors.
There are still a remarkable number of investors out there, and an even more remarkable percentage of mainstream financial journalists, who seem to think that everything is alright just because the flagship indices like the Dow Jones Industrials and the S&P500 haven’t caved in yet, but as we will now see they are probably just about to.

We start with the 6-month chart for the S&P500 index, where we see that it has just broken down from a topping Triangle, that formed after the big October recovery. This breakdown was predicted on the site last week. From this position it is vulnerable to a precipitous decline, which could happen next week ahead of the Fed meeting, or after it – or both.
Latest COTs for the S&P500 index are bearish, with the Commercials holding their largest short positions for nearly a year – more bearish than before the August plunge when they were modestly long. This chart certainly allows for a lot more downside.

On the 5-year chart for the S&P500 index we can see exactly why it stalled out where it did, and has now reversed. It had arrived at the boundary of a giant Distribution Dome that started to form way back late in 2011. Some bullish writers have claimed that the market has broken out upside from a smaller Dome of shorter duration, but their Dome is overridden and nullified by our bigger stronger one. As we can see, our Dome has capped the advance and is bearing down on the index, forcing it lower, and it is now clear that the recent advance served to complete the Right Shoulder high of a large Head-and-Shoulders top. Last ditch support is above and at 1800 - once this fails, the market should plummet.
How low could the market drop? – before reading on you might want to make sure you are sat down, and perhaps with a stiff drink. We’ll see just how far it could fall on the long-term 20-year chart for the Dow Jones Industrials shown below. On this chart we see that after a long bullmarket phase from the 2009 low, the market has risen to the top of a gigantic bullhorn pattern. If it turns lower here, which it certainly appears to be doing, it could conceivably drop all the way across the bullhorn, back to the lower boundary in the 6000 area. I know – it doesn’t seem possible, just too far-fetched, right? – WRONG!! – with a brutal depression almost upon us caused by the rapidly accelerating implosion of the bankrupt fiat money system after over 40 years of excess after the abolition of the gold standard by Richard Nixon, culminating in the vertical blowoff move of recent years, as the entrenched beneficiaries of this system played the last cards in their hand, these hyper-leveraged markets could now collapse in one of the biggest self-feeding liquidations in history. Whether it will drop back as far as 6000 I don’t know, but it is certainly within the realms of possibility – and it will seem a lot more possible to you as you read on and witness the carnage that is already underway elsewhere.
The Dow Jones Transports have been much weaker than the Dow Jones Industrials and the S&P500 index in the recent past, as we can see on its 3-year chart shown below, on which we can see that a large, downsloping, and thus very bearish, Head-and-Shoulders top is rapidly approaching completion. Once the neckline is breached, this index could plummet. The Transports are providing a classic Dow Theory non-confirmation of the action in the Dow and the S&P500 index, and it means trouble.
There are other markets pointing to Big Trouble dead ahead, like the London FTSE100 index, on whose long-term 20-year chart we can see that a gigantic Triple Top is completing, with the market now starting to descend from the 3rd protracted peak…
Other European market indices look similar, like the French CAC, the German DAX and the pan-European STOXX600, as we would expect.

Emerging Markets are in ragged retreat again, and descending from the 2nd protracted peak of a gigantic Double Top. The Emerging Markets indices made a good recovery from their 2008 crash lows, with investors thinking it was back to business as usual but they were unable to make new highs and have limped along sideways for years marking out a very elongated 2nd peak of what is viewed as a giant Double Top. Now they are clearly on the defensive again and if the $30 level on the EEM chart gives way, it could plummet quickly all the way back to its 2008 lows – or lower still. Again, this clearly means Big Trouble, not just for Emerging Markets themselves, but all markets.
Commodities markets are in a parlous state, as is made plain by the long-term CRB index chart, which is at multi-decade lows. If you ever needed proof of the gathering forces of depression, this is it…
The slump in the oil price is a symptom of the deepening global malaise, and makes nonsense of the claims of an economic recovery…
Our downside target for oil has for some months been the mid-low $20’s. As we can see on the Light Crude chart above, it is now arriving at a support level, which ordinarily might be expected to generate a bounce, or at least a temporary price stabilization, but if markets generally drop heavily or crash then it is likely to continue lower with little or no pause, probably into our target zone.

The slump in world trade has contributed to a decline in shipping rates to very low levels – they are now close to hitting record lows, another sign of depression…
Both the Baltic Dry shipping index and the Commodities markets have been warning of depression for a long time, but stockmarkets have happily ignored them up to now, pumped up as they have been by massive Central Bank slush funds financed by QE, so that ordinary citizens can finance speculators (by later losing their purchasing power via inflation of the price of basic goods), but it’s going to be a lot harder for markets to ignore the breakdown and collapse of the Junk Bond market, which really started to get underway just last week…
The message of this chart is that interest rates are going up, whether the Fed wants to join in raising them or not. When rates rise significantly markets will crash, because of the impossibly huge debt overhang.

Turning to sectors within the US stockmarkets that look set to implode, we have Biotech, which signaled that it is entering a bearmarket back in September, when it plunged on huge record volume as it broke down from its parabolic slingshot uptrend…
As we can see, Biotech’s bearmarket has only just begun, and it still has an awful long way to fall. On the site we have looked at leveraged inverse ETFs and options to take advantage of the expected drop in last week’s article Preparing for the Next Biotech Sector Plunge.

Meanwhile the Tech heavy NASDAQ index still looks relatively strong, but has just double-topped with its highs of last Summer, and is moving in conformity with the broad stockmarket S&P500 index, and so should drop with it. Interestingly the NASDAQ appears to be topping out just a shade above its 2000 bubble highs, and even though the current bubble does not look so serious this time round because it has not risen so steeply as in 2000, the red-hot Bay Area (San Francisco) property market certainly has the attributes of a bubble about to burst.
While the products of Tech companies are certainly alluring, and much additional demand is generated by consumers upgrading their equipment every 6 months or less in order to keep up with their peers and abreast of the latest developments, they will find it a lot harder to do so when they are flat broke, out of a job and maxed out on credit. In this situation demand for even the most attractive products can falter. So the stocks of Tech companies can drop like anything else.

Speaking of the property markets, they are still riding high, but don’t expect that to last much longer. The REIT chart below shows that it is still at a high level within an uptrend, which should fail soon as rates rise and stockmarkets crash. If you own speculative property you should offload it to the bagholders as soon as possible.
We will end with an interesting Treasury proxy chart which shows that Treasuries broke out upside from a rather large Triangle on Friday. What this suggests is that, despite the huge careening deficits and the likelihood of a dollar crisis later on, investors are still going to run for safety to Treasuries during a 2008 style meltdown. Why? - because they reason that the US will be the last domino to topple, certainly well after Europe and debt-wracked Japan have gone down the drain.
I could shovel still more of this stuff onto you, but if you haven’t got the picture by now you never will.

End of report.

Thursday, December 10, 2015

Guest Post: The Rise of Uncle Buck - A Threat to All

Canadian investors have not had a good year, as cash is likely to outperform both stocks and bonds for the first year since 1990. The trade of the year, though, has been the U.S. dollar, which has skyrocketed nearly 17 per cent over the past 12 months against the loonie and other major currencies. Investment managers…

Wednesday, December 09, 2015

Daily News Roundup: "You ain't no Muslim, bruv" (shouted by passenger after machete attack in London)

International Affairs:
Russia loses control of Baltic energy supply (Bloomberg)
IMF only enforcing debts owed in US dollars to US allies (Zero Hedge)
The hair: Trump faces Mideast backlash after Muslim ban proposal (Bloomberg)
Opposition rout of government in Venezuela is a huge victory for democracy (The Economist)

Oil continues tumble as OPEC abandons production target (Bloomberg)
Iron at $30 threatens largest producers (Bloomberg)
Fear grips market as oil leads commodity crash (The Telegraph)

Business & Finance:
The Fed could trigger massive "stop loss" in the S&P if "liftoff" goes awry (Bloomberg)
The junk bond market is flashing an early warning sign for the global economy (The Telergaph)

Paris: 940 decisions in 3 days (Bloomberg)
Billionaire Bollore readies London electric car scheme (The Telegraph)

Art & Design:
The Rolls-Royce Cocktail Hamper (Hi Consumption)
No more excuses for breakfest! The Hamilton Beach Breakfest Burrito maker (Cool Material)
Lamorghini Grand Tourer up for auction in January (Uncrate)

Sunday, December 06, 2015

Financials (XLF) and Emerging Markets: "Finnermarkets," new word (EEM)

There isn't a narrative that ties these two together, unfortunately. The one thing we can say is that there was a bullish retracement after the jobs report on Friday and a renewed call for interest rates to rise this month so although the market may have wanted to go down, with news like that a "strong showing" must be made. We must all be aware though that the retracement wasn't complete although it was broadly across the market. I think that the trend still remains down.

Below are the financials (XLF) which I have not written about in ages as their trends have been the tightest and curiously clues in the indicators the most ambiguous. Looking for the regular buy and sell signals, even obvious ones like on the RSI(5) has been hard. But recently divergence has emerged prominently on the MACD and TRIX indicators. Also we have not witnessed a break above the resistance line made by highs in August and early November. Furthermore resistance at $25.25 from the all time high has not been touched. I am calling a short/sell on XLF.
The recent decision by OPEC to maintain elevated crude production not only has bearing on the energy index which I have already reported on, but emerging markets (EEM) as well. I had not appreciated this obvious connection to oil and emerging markets, but the first country to lose out on this is Russia. Playing around with my charts I noticed a paradoxical bullish declining wedge. If EEM fails to stay above this line then the second wave (ascending portion) is officially over and the final third down-wave will begin. Any break below $33.00 is very very bearish. Right now I am recommending a speculative short/sell. My personal belief is that wave two of the descent has come to an end and the third wave decline is about to begin in earnest. Indicators are also oversold meaning that it may be a while before the decline begins so please watch carefully. Just as we saw with the financials, the bullish retracement on Friday did not correct the overall decline from the past few days.

Saturday, December 05, 2015

The OPEC Put: The Fortuitous Syrian Connection

Recently I had made a terrible call on energy - I was bullish in a climate and time of tremendous fear (this was recently in or around the attacks in Paris). I felt "mission creep" was inevitable in Syria and much like the invasions of Iraq or the recent attacks in the Sinai I felt this was as good a time as any for oil to begin going back up. I was wrong. This past week OPEC decided to do away with the voluntary output limits and rollover their continued policy of elevated crude production.

What I failed to appreciate was the dynamic of foreign relations in this trading play. The charts did appear, albeit fleetingly and only in the near-term, as if a turn-around was possible and that crude could begin to climb again. The medium to long-term charts did not suggest a reversal for crude and the piece that was missing was OPEC's recent announcement. Yes, a vote by the United Kingdom for air-strikes coupled with France's recent foray into the theater combined with U.S. military advisers on the ground and rumblings of imminent troop deployments should have the opposite effect, but on a background of sustained over-production by OPEC these recent (and rather sinister) developments remain insignificant. Conspiracy theorists I am sure will make the link that the military involvement in a geopolitical hot-spot like Syria 'conveniently' occurred at a time of OPEC over-production, and I admit too, it is a fortuitous coincidence.

On the charts it appears as if our second wave is done and our third and final wave down is about to begin. The chart that best depicts this is $XOI, the Oil Index. We broke through a critical support line on Thursday and Friday the move lower continued, although it did close 'up.' On the weekly chart it appears the long-term final support is 1075 for $XOI but near term it may bounce off of the 38.2% retracement at 1119. If 1119 is breached I think a significant further fall can be expected.
The picture becomes a little muddled when looking at some of the other energy charts like XLE. XLE is right now sitting just below support for a channel I thought began forming back in late August and uses the late August, October and early November highs. We have haven't yet had two clear closes below that support line so it still has this "will it or won't it" feel to it. Also a head and shoulders pattern may have appeared meaning this could fall to just below 57.
Am I right? Could we really be setting up for another plunge in energy? Please allocate capital appropriately using ERX and ERY.

Thursday, December 03, 2015

Daily News Roundup: In alcohol's defense, I've done a lot of stupid shit sober

Foreign Affairs:
Draghi riles Germany with QE overkill (The Telegraph)
Impeachment in Brazil (The Economist)
Russia suspends Turkish gas pipeline over downed warplane (CNN)

Iron ore on the cusp of $30 as BHP and Rio shares continue slump (Bloomberg)
OPEC putting pressure on Saudi Arabia (Bloomberg)
Evans Pritchard: Oil speculators risk 'short squeeze' (The Telegraph)
Gold at five year low, but cash buying to restore in 2016 (South China Morning Post)

Dow Chemicals turns sewage into a beverage (Bloomberg)
Landmines good for penguins? You bet! (Design You Trust)

Business & Finance:
Renminbi joins IMF reserve currency basket (The Economist)
Citi turns bearish on stocks (Zero Hedge)

Art & Design:
It's baaaaccckkkkk: 2017 Porsche 911 Turbo and 911 Turbo S (Hi Consumption)
Toronto's super-cross track for the PanAm Games (Uncrate)
The making of the critically acclaimed movie Anomalisa (The Awesomer)

Tuesday, December 01, 2015

Europe (VGK): Movin' on up (maybe to about $52.75)

The European markets (VGK) have been an area of interest since Wednesday's strong bounce off of the blue diagonal resistance line set up by higher lows in October and November. Today we also had a breakthrough of another resistance line set up by highs in November and July. Next stop is a resistance line setup by highs in June and August at around $52.74. 

The obvious culprit for this euphoria is a perceived bullish announcement by Draghi this Thursday that can lift both the Euro and markets. One must look at this announcement in context however and appreciate that the charts are indicating that it's effects may be only temporary. Although it may be bullish in the near-term VGK finds itself in a large ascending bearish wedge which is itself part of a large declining channel. At some point in the new year, and likely around the second red-dotted resistance line at $52.75 to $53.00, a second top in our wedge will go in when markets are reminded of the weak manufacturing sector, surplus inventories, and an increasingly depressing foreign picture.