Thursday, September 25, 2014

Oil ready for a bounce....?

Oil ($WTIC) is moving downwards but there is a building RSI and MACD divergence(Blue lines).If oil manages to breakout of the descending trendline(black) then next target is 97,7$.Not breaking the trendline will lead oil prices towards 87,5$

Saturday, September 20, 2014

USD index 2008-now:A continuation or a reversal pattern?Use of Mass index as a guide

There is a striking similarity of the price action of USD index between 1988-1997 and 2008-now.In both cases, after a substantial decline, USD formed a trading range pattern(blue boxes).Apart from the visual similarity between these two time periods, we believe that there are important quality-technical differences up to now.


  • Time:9 years
  • Mass index signals: 4 buy signals(green arrows){buy=Mass index>26 and USD in downtrend) and 2 sell signals(red arrows){sell=Mass index>26 and USD in uptrend}The 3rd sell signal was in mid-1997 after price outbreak from the descending black line(blue circle).During the final bottom of this trading range there was a buy signal and after that an extensive USD uptrend that resulted in trading range breakout(blue circle) and a top at 120 in 2001-2002.

  • Time:6 years (not completed pattern?)
  • Mass index signals:1 buy signal at the beggining of the trading range(2008) followed by 3 sell signals (2009,2010,2013).Currently there is no buy signal and USD price is still inside the trading range.
Taking a closer look to 2008-today formation:

-USD is in a steep uptrend (RSI overbought)
-There are 2 overhead resistance trendlines(black) currently at 86 and 88-89(top of trading range in pink).
-No new buy signal from Mass index at the beggining of the current upmove
-Mass index is starting to climb gradually.

So, for the time being we suspect that USD will stall at either 86 or 88-89 possibly along with a Mass index reading of >26.After that USD might retreat towards 79 or even 72-74.
We believe that 

  • In order for USD bulls to see a sustained USD rally above 89 first we need to have a downmove toeards the lower part of trading range along with a Mass index>26(buy signal)
  • In order for USD bears to see a breakdown of USD bellow 72 we need to see first a bounce of USD price at 86 or 89 along with a sell signal from Mass index during the current upmove and an absence of a Mass index buy signal during the following downmove.  

Bullish Scenario

Bearish Scenario

Wednesday, September 17, 2014

Various asset class prices in oil barrels and What do they reveal...

-"Oil makes the world go round"?
-Oil is the most valuable commodity for the entire economic activity worldwide.In the following charts we can see the price of various asset classes in oil barrels.Oil exporters are producing wealth with which they can buy different asset classes like precious and basic metals, equities or bonds.Let us now see in terms of oil barrels which of these assets are now expensive and which of them are cheap


Gold is currently expensive.Not a buy.
Platinum is fairly priced.Not a buy.

Palladium is expensive.Maybe a sell
Basic metals
Copper is relatively expensive.Not a buy.
Equities are fairly priced.Still not expensive but near a resistance line(middle horizontal line) and maybe that's why near a correction.
F)30 year Bond price
Bonds are still cheap and in a downtrend.However bonds might be ready to break the descending trendline from 1999 and start an uptrend.That would be another buy signal for bonds.

Let us now see what it would have happened if we had traded these assets when they were cheap(buy) or expensive(sell) in terms of oil barrels. 
Not bad at all!We can see that in many cases buying or selling various asset classes based on their historical oversold or overbought condition in terms of oil barrels  is an interesting although relatively long-term market timing strategy.
We can also see that the only two asset classes that are currently on a buy signal are SPX and Bonds(bonds last buy signal in 2005, and SPX last buy signal in late 2011).

Tuesday, September 16, 2014

Gold Update

Gold is currently in a downtrend(daily).It is now recovering from an oversold condition and is forming, possibly, a bearish flag towards 1240-1245$.From there we see 2 possible scenarios:
A)(grey)Gold hits 1240-1245 and then falls towards 1190-1200$
B)(blue)Gold pierces the steep descending black trendline moving towards 1260 and then retracing again towards 1240. 

Thursday, September 11, 2014

Palladium:A correction or something bigger?

Palladium (PALL) broke down from its rising channel(blue lines).Next stop is 78-79 where 55 exponential moving average (weekly) and a horizontal line from early 2013 top provide support to palladium price.

Bulls need to see PALL price staying above 78-79 AND RSI(Weekly) above 40.In that case these levels might be a good buying opportunity.On the other hand if price slips below these levels next support level is 74-75 (black trendline from summer 2012 upmove).A PALL price of 74-75 will probably result to a stall of the current upmove and a formation of a trading range.
In the next few days there is a possibility for a reaction of PALL price towards 82 and then a final move towards 78-79. 

Monday, September 8, 2014

Baltic Dry Index: What BDI reveals about commodity prices

Baltic Dry Index ($BDI) is considered a leading economic indicator.From Wiki:

Why economists and stock market investors read it[edit]

Most directly, the index measures the demand for shipping capacity versus the supply of dry bulk carriers. The demand for shipping varies with the amount of cargo that is being traded or moved in various markets (supply and demand).

The supply of cargo ships is generally both tight and inelastic—it takes two years to build a new ship, and a ship's fixed costs are too expensive to take out of circulation the way airlines park unneeded jets in deserts. So, marginal increases in demand can push the index higher quickly, and marginal demand decreases can cause the index to fall rapidly. e.g. "if you have 100 ships competing for 99 cargoes, rates go down, whereas if you've 99 ships competing for 100 cargoes, rates go up. In other words, small fleet changes and logistical matters can crash rates..."[6] The index indirectly measures global supply and demand for the commodities shipped aboard dry bulk carriers, such as building materials, coal, metallic ores, and grains.

Because dry bulk primarily consists of materials that function as raw material inputs to the production of intermediate or finished goods, such as concrete, electricity, steel, and food; the index is also seen as an efficient economic indicator of future economic growth and production. The BDI is termed a leading economic indicator because it predicts future economic activity.[7]

Every time, since 1985, BDI was near or under 500 levels (Rock bottom levels for BDI,even during 2009 when oil prices collapsed and new ships were entering service) that signaled a major bottom for commodities index(CCI)

Zooming in BDI chart

We can see that BDI has probably bottomed out at 500 (meaning that commodities index ($CCI) has also bottomed at 500) and in order for commodities to have a substantial rally, we need to see Baltic Dry Index above the thin black resistance line, preferably with an RSI reading of 65 and above.

Wednesday, September 3, 2014

Bullish Uranium

Uranium ETF (URA) has just managed to go above a descending resistance trendline (black) from March this year and is now confined inside a triangle (blue lines).We believe that URA is going to break out of this triangle soon and move fast towards 16,5.Critical price level for bullish scenario to materialize is 15,5.

Our longterm view for URA is that it is forming a saucer type bottom (