Saturday, February 27, 2016

Russell 2000 (IWM): Mind the gap!

Russell 2000 is currently in a corrective ABC wave which will push the price at 107.5 where a gap is waiting to be filled and a significance resistance line lies.After that we believe that IWM will enter a ferocious wave 3 of III down which will bring IWM down to 75 level (almost 30% down from current levels).

So: Please Mind the Gap!

Saturday, February 20, 2016

Energy Sector Equities (XLE): A buying opportunity

Back in November we warned our readers about another last leg down(5th wave) for XLE and we predicted a bottom at around 55$(Energy stocks (XLE) about to bounce and head south).Today we present an updated chart of XLE pointing out signs of a bottoming process: 
A)Candlesticks with Long tails in long timeframes(weekly,monthly)
B) High volumes
C) Positive RSI divergence

 So, is XLE a buying opportunity at current levels?
Probably yes...

Thursday, February 11, 2016

GOLD:HUI ratio : Is another gold bull market starting?

Recently we showed (Gold:SPX ratio persistent RSI divergence and lessons from the past) that there is a striking similarity of the last 3 years of gold's bear market in late 90's with the last 3 years of the current bear market.A huge divergence between gold:spx and its RSI has been built.We expected this divergence to give way and the ratio to increase on spring -summer time-frame (meaning a significant overperformance of gold relative to SPX).It seems that the expected move is actually happening now.
However in order for this move to be a prolonged one we believe that a significant overperformance of gold miners(GDX,HUI) relative to gold is imperative.
During the early stages of the last gold bull market (1999-2011) initially we witnessed a spike in gold price in 1999 which was followed by a significant retrace.That gold bull market started to run relentlessly when miners started to overperform gold.In the following chart we can see that back in early 00's gold price started to move upwards significantly after HUI:GOLD ratio EMA21 crossed bellow EMA55 and in the same time its RSI sunk below 30.

We expect a similar overperformance of miners(HUI) relative to gold in order for the new gold bull market to be confirmed.

Wednesday, February 10, 2016

A stealth Bull Market...and at the end "The Dominoes Fall"

Today we are presenting the following chart(weekly)

As you can clearly see, the underlying asset is in a bull market:
A.Around late 2014  EMA21 crossed above EMA55 ("golden cross")
B.Since then:
1.Price>EMA21>EMA55 (most of the time)
2. the price has found a solid support at 55 EMA
3.RSI has been above 50 and recently found support at 40

Alas...The above chart represents the TED spread.From Wiki(emphasis is ours):"The TED spread is the difference between the interest rates on interbank loans and on short-term U.S. government debt ("T-bills"). TED is an acronym formed from T-Bill and ED, the ticker symbol for the Eurodollar futures contract. The TED spread is an indicator of perceived credit risk in the general economy,[2] since T-bills are considered risk-free while LIBOR reflects the credit risk of lending to commercial banks. An increase in the TED spread is a sign that lenders believe the risk of default on interbank loans (also known as counterparty risk) is increasing. Interbank lenders, therefore, demand a higher rate of interest, or accept lower returns on safe investments such as T-bills. When the risk of bank defaults is considered to be decreasing, the TED spread decreases.[3] The long-term average of the TED spread has been 30 basis points with a maximum of 50 bps. During 2007, the subprime mortgage crisis ballooned the TED spread to a region of 150–200 bps. On September 17, 2008, the TED spread exceeded 300 bps, breaking the previous record set after the Black Monday crash of 1987.[4] Some higher readings for the spread were due to inability to obtain accurate LIBOR rates in the absence of a liquid unsecured lending market.[5] On October 10, 2008, the TED spread reached another new high of 457 basis points."

Unfortunately TED spread "stealth bull market" indicates further (significant) pressure for Equities and Debt markets.To paraphrase a quote from one of our favorite movies:
With so much bad Debt, something will snap (see DB). And when it does, things will turn nasty. And then central banks will be forced to do the only thing they know how to do.