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Post by TradingForGod on Aug 27, 2004 19:54:40 GMT -5
Well, AZMN turned in a MEGA performance today. It may have only been a good beginning, and it may not “seal the deal”, but it was a necessary first step to begin building a technical case for a move higher. Let’s review what happened. First, AZMN closed three cents higher at 17 cents today. This was the highest daily close since 2/4/04. That by itself is potentially pretty significant. But in addition, it made this new high on volume of 468K share, 5 times this months average daily volume, and more than 10X the volume over the last week. Clearly somebody is making a move here. The volume today was the highest since 10/03 when a lot of activity transpired. Back then volume really picked up and prices almost tripled in a less than a week (what was THAT all about?) only to fall back again. In fact, if the chart I am looking at is accurate, other than last years spike there have only been a handful of days in the last ten years with volume greater than today’s, though I could be wrong about that. This month’s total volume is still quite normal because there were many days this month when very little traded, but it does set the potential for some very significant activity down the line. Much has already been said about the prolonged basing action we have seen in Azco over the last 21 months. I won’t repeat that here, except to say that a lot of people will be looking at the top of that basing pattern for potential resistance. There are three potential resistance points associated with this pattern. The first is the peak from last October at 30 cents. I really don’t see much in the way of technical resistance until you get up there. That’s an almost 100% improvement from today’s close. And remember, last year it took five sessions to go from 10 cents to 30 cents (what WAS that all about?). It’s at least possible, if not probable we’ll see that happen again. The second resistance point is the twin spike lows at 31.3 cents from 1998 and 2000 (thin red line). I think that these lows were what caused AZMN to stall at 30 cents last year. The third potential resistance is at 37 cents. That is the Elliott Wave swing target going back to the mega-flush low at 2 cents on 6/20/03. The first rally went 28 cents to 30 cents on 10/16/03. Then followed a huge, complex, choppy b-wave pattern that put in a low at 9 cents last month (oh, what a buy!). The target is 28 cents above there (9+28=37). Should AZMN achieve this target it would be the highest price in almost two years. That by itself would be pretty impressive. Longer term, and I don’t really know what that means, the next key resistance is the decade-old downtrend line at about 75 cents. Given that there are four connecting points (ignore the bad tic in January) this trendline is pretty significant. It should be tough to crack, but if it fails it will “officially” put an end to the downtrend that has plagued this issue as far back as I have data. That should trigger an almost immediate rally to 1.25-1.56, the 2000 and 2002 highs. Past that, and we reach the limit of my “crystal ball”. Everything I’ve described so far is capable of happening just on pure technicals if money really starts flowing into this issue. Other factors like new discoveries would have to be present to sustain the type of increases we’re talking about here. That doesn’t mean it won’t happen. Far from it. But we’ll need time to see how this play evolves before making macro-term projections. There just simply isn’t enough chart data here to make a well-reasoned market call. But I will say this: If prices get above the Cal’00 high I see absolutely no reason why it couldn’t rally up to the contract high at 2.875. Wouldn’t that be cool? Bottom line: I’m looking for a quick move to test 30-37 cents. If that level holds, AZMN could drop back to 16 cents one more time to make sure it really wants to go higher. IF 37 cents breaks, WATCH OUT! I’d sure hate to be the guy that sold out at 11.5 yesterday. Blessings, TFG Please note: I don’t normally trade individual stocks, but I did take a position in AZMN today on the break-out. I’ll try not to let that color my technical assessment, but I wanted you to know that I am not totally unbiased here.
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Post by TradingForGod on Aug 27, 2004 19:54:40 GMT -5
Well, AZMN turned in a MEGA performance today. It may have only been a good beginning, and it may not “seal the deal”, but it was a necessary first step to begin building a technical case for a move higher. Let’s review what happened. First, AZMN closed three cents higher at 17 cents today. This was the highest daily close since 2/4/04. That by itself is potentially pretty significant. But in addition, it made this new high on volume of 468K share, 5 times this months average daily volume, and more than 10X the volume over the last week. Clearly somebody is making a move here. The volume today was the highest since 10/03 when a lot of activity transpired. Back then volume really picked up and prices almost tripled in a less than a week (what was THAT all about?) only to fall back again. In fact, if the chart I am looking at is accurate, other than last years spike there have only been a handful of days in the last ten years with volume greater than today’s, though I could be wrong about that. This month’s total volume is still quite normal because there were many days this month when very little traded, but it does set the potential for some very significant activity down the line. Much has already been said about the prolonged basing action we have seen in Azco over the last 21 months. I won’t repeat that here, except to say that a lot of people will be looking at the top of that basing pattern for potential resistance. There are three potential resistance points associated with this pattern. The first is the peak from last October at 30 cents. I really don’t see much in the way of technical resistance until you get up there. That’s an almost 100% improvement from today’s close. And remember, last year it took five sessions to go from 10 cents to 30 cents (what WAS that all about?). It’s at least possible, if not probable we’ll see that happen again. The second resistance point is the twin spike lows at 31.3 cents from 1998 and 2000 (thin red line). I think that these lows were what caused AZMN to stall at 30 cents last year. The third potential resistance is at 37 cents. That is the Elliott Wave swing target going back to the mega-flush low at 2 cents on 6/20/03. The first rally went 28 cents to 30 cents on 10/16/03. Then followed a huge, complex, choppy b-wave pattern that put in a low at 9 cents last month (oh, what a buy!). The target is 28 cents above there (9+28=37). Should AZMN achieve this target it would be the highest price in almost two years. That by itself would be pretty impressive. Longer term, and I don’t really know what that means, the next key resistance is the decade-old downtrend line at about 75 cents. Given that there are four connecting points (ignore the bad tic in January) this trendline is pretty significant. It should be tough to crack, but if it fails it will “officially” put an end to the downtrend that has plagued this issue as far back as I have data. That should trigger an almost immediate rally to 1.25-1.56, the 2000 and 2002 highs. Past that, and we reach the limit of my “crystal ball”. Everything I’ve described so far is capable of happening just on pure technicals if money really starts flowing into this issue. Other factors like new discoveries would have to be present to sustain the type of increases we’re talking about here. That doesn’t mean it won’t happen. Far from it. But we’ll need time to see how this play evolves before making macro-term projections. There just simply isn’t enough chart data here to make a well-reasoned market call. But I will say this: If prices get above the Cal’00 high I see absolutely no reason why it couldn’t rally up to the contract high at 2.875. Wouldn’t that be cool? Bottom line: I’m looking for a quick move to test 30-37 cents. If that level holds, AZMN could drop back to 16 cents one more time to make sure it really wants to go higher. IF 37 cents breaks, WATCH OUT! I’d sure hate to be the guy that sold out at 11.5 yesterday. Blessings, TFG Please note: I don’t normally trade individual stocks, but I did take a position in AZMN today on the break-out. I’ll try not to let that color my technical assessment, but I wanted you to know that I am not totally unbiased here.
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Post by TradingForGod on Aug 27, 2004 8:10:20 GMT -5
We’ve looked at the Nasdaq on a long-term (weekly) basis and a short-term (intra-day) basis so far, so today I thought we would take a look at the Nasdaq daily chart. As before, I know that it is awfully busy, but we’ll try to highlight the main points. Remember that the Nasdaq bounced off uptrend support and the 38% (Fibonacci) retracement earlier this month and that the target proposed for the bounce is at least 1905. So far, the rally has extended to 1861. The 40-day MA is just above here at 1867, which is also the 38% retracement if the sell-off from early July to early August (lowest red dashed line). This is a big number to get through. The Dow and the S&P, which are more bullish looking than the Nasdaq anyway, have already exceeded their equivalent resistances. I think it’s probably just a matter of time before the Nasdaq does the same thing, but I’ll be watching this level really closely over the next couple of sessions. Assuming that it does break higher, I am still focused on the 1905 level. This is important several different ways. First, as previously noted it’s the 38% retracement of this years sell-off. Second, it’s the 50% retracement of the sell off since early July. It’s also where the upper Bollinger band is currently located. Finally, it’s generally were the cluster of lows in March and May are located. All this leads me to believe that the Nasdaq should stall in this area the first time up. It would be an excellent place to take profits on longs acquired underneath here. A solid close above 1905, however, probably is good for another 80-100 point rally so watch for that to get back fully invested. Longer-term, I am not convinced that the bottom is in yet. It could be, but the weekly chart suggests it is not. The BIG TIME important points to consider for that determination are the downtrend lines off this years choppy price action. Those numbers are 10348 for the Dow, 1135 for the S&P, and 2022 for the Nasdaq. Obviously, the Dow and S&P are much closer to an upside break-out. If these upper resistances fail it will likely set off another explosive rally similar to what we experienced last year. Wouldn’t THAT be great? Here’s hoping! God bless us all, TFG
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Post by TradingForGod on Aug 27, 2004 8:10:20 GMT -5
We’ve looked at the Nasdaq on a long-term (weekly) basis and a short-term (intra-day) basis so far, so today I thought we would take a look at the Nasdaq daily chart. As before, I know that it is awfully busy, but we’ll try to highlight the main points. Remember that the Nasdaq bounced off uptrend support and the 38% (Fibonacci) retracement earlier this month and that the target proposed for the bounce is at least 1905. So far, the rally has extended to 1861. The 40-day MA is just above here at 1867, which is also the 38% retracement if the sell-off from early July to early August (lowest red dashed line). This is a big number to get through. The Dow and the S&P, which are more bullish looking than the Nasdaq anyway, have already exceeded their equivalent resistances. I think it’s probably just a matter of time before the Nasdaq does the same thing, but I’ll be watching this level really closely over the next couple of sessions. Assuming that it does break higher, I am still focused on the 1905 level. This is important several different ways. First, as previously noted it’s the 38% retracement of this years sell-off. Second, it’s the 50% retracement of the sell off since early July. It’s also where the upper Bollinger band is currently located. Finally, it’s generally were the cluster of lows in March and May are located. All this leads me to believe that the Nasdaq should stall in this area the first time up. It would be an excellent place to take profits on longs acquired underneath here. A solid close above 1905, however, probably is good for another 80-100 point rally so watch for that to get back fully invested. Longer-term, I am not convinced that the bottom is in yet. It could be, but the weekly chart suggests it is not. The BIG TIME important points to consider for that determination are the downtrend lines off this years choppy price action. Those numbers are 10348 for the Dow, 1135 for the S&P, and 2022 for the Nasdaq. Obviously, the Dow and S&P are much closer to an upside break-out. If these upper resistances fail it will likely set off another explosive rally similar to what we experienced last year. Wouldn’t THAT be great? Here’s hoping! God bless us all, TFG
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Post by TradingForGod on Aug 26, 2004 7:03:26 GMT -5
One of CT’s favorite stock (for good reason) is K-mart. This widely known issue has survived the hard times of Wal-Mart competition, store closures, and the “Martha Stewart Collection” to stage a huge come-back in 2004. So far this year it has almost quadrupled in value. WOW! I sure wish I knew how to pick stocks! Let’s use the things that we have been discussing recently to analyze the chart below. You can see that the rally off the low has had two main up legs so far, one into early April and one into early July. The first leg up (wave 1) was $26. The second leg up (wave 3) was about $44, right at 1.618 Fibonacci extension target. Each up leg has been followed by a sideways consolidation (waves 2 and 4) that lasted about six weeks. Note how these corrective sell offs evolved as an a-b-c pattern (in Elliott Wave lingo). Both of them gave great buying opportunities into the lower Bollinger band. In fact the sell off that just ended gave TWO such opportunities. KMRT is currently trading sideways in a narrow range after the explosive pop higher two week ago. The current price is above the 20 and 40-day MAs, but the 20-day MA is below the 40-day MA right now. That’s pretty neutral. Momentum, as expressed by the MACD is positive, but not real strong right now. That’s also pretty neutral. The ADX trend indicator has weakened dramatically over the last two months as KMRT has chopped sideways, and stochastics are pointed lower right now. Again, taken in total this is pretty neutral too. Putting it all together, the math-based indicators suggest that KMRT could go either way from here, at least in the short term. HOWEVER, because of the Elliott Wave analysis I am strongly leaning toward an upside resolution of this choppy price action. If that happens, there are two primary targets for the rally. Normally the 5th wave of a move is about equal in length to the 1st wave, especially when the 3rd wave extends like this one did. If that happens here, then KMRT should peak out just inside of $88. If you are long this stock, I would suggest taking at least half of your position off the table in this area. If the 5th wave extends as well, which is unusual but not unheard of, the target for the rally is at about 105ish. I would exit all length at that point, save perhaps 5-10% just in case this market goes psycho. After this 5 wave rally ends, KMRT should correct anywhere from 38% to 62% of the whole rally. Frequently, corrections pull back to the bottom of the 4th wave of the previous rally, which in this case would be this months low at about $62. A close below there probably means the primary bull market for this stock is over. This is especially true if it happens after the uptrend line, now at about $57, gets up over $62 as well. A violation of the trendline would be doubly negative. It’s been a great ride for KMRT this year, especially given the malaise in the overall equity market. But it seems to me that we are nearing the destination and we need to prepare for arrival. Put your tray tables up, and your seatbacks in their full, upright position. Blessings, TFG
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Post by TradingForGod on Aug 26, 2004 7:03:26 GMT -5
One of CT’s favorite stock (for good reason) is K-mart. This widely known issue has survived the hard times of Wal-Mart competition, store closures, and the “Martha Stewart Collection” to stage a huge come-back in 2004. So far this year it has almost quadrupled in value. WOW! I sure wish I knew how to pick stocks! Let’s use the things that we have been discussing recently to analyze the chart below. You can see that the rally off the low has had two main up legs so far, one into early April and one into early July. The first leg up (wave 1) was $26. The second leg up (wave 3) was about $44, right at 1.618 Fibonacci extension target. Each up leg has been followed by a sideways consolidation (waves 2 and 4) that lasted about six weeks. Note how these corrective sell offs evolved as an a-b-c pattern (in Elliott Wave lingo). Both of them gave great buying opportunities into the lower Bollinger band. In fact the sell off that just ended gave TWO such opportunities. KMRT is currently trading sideways in a narrow range after the explosive pop higher two week ago. The current price is above the 20 and 40-day MAs, but the 20-day MA is below the 40-day MA right now. That’s pretty neutral. Momentum, as expressed by the MACD is positive, but not real strong right now. That’s also pretty neutral. The ADX trend indicator has weakened dramatically over the last two months as KMRT has chopped sideways, and stochastics are pointed lower right now. Again, taken in total this is pretty neutral too. Putting it all together, the math-based indicators suggest that KMRT could go either way from here, at least in the short term. HOWEVER, because of the Elliott Wave analysis I am strongly leaning toward an upside resolution of this choppy price action. If that happens, there are two primary targets for the rally. Normally the 5th wave of a move is about equal in length to the 1st wave, especially when the 3rd wave extends like this one did. If that happens here, then KMRT should peak out just inside of $88. If you are long this stock, I would suggest taking at least half of your position off the table in this area. If the 5th wave extends as well, which is unusual but not unheard of, the target for the rally is at about 105ish. I would exit all length at that point, save perhaps 5-10% just in case this market goes psycho. After this 5 wave rally ends, KMRT should correct anywhere from 38% to 62% of the whole rally. Frequently, corrections pull back to the bottom of the 4th wave of the previous rally, which in this case would be this months low at about $62. A close below there probably means the primary bull market for this stock is over. This is especially true if it happens after the uptrend line, now at about $57, gets up over $62 as well. A violation of the trendline would be doubly negative. It’s been a great ride for KMRT this year, especially given the malaise in the overall equity market. But it seems to me that we are nearing the destination and we need to prepare for arrival. Put your tray tables up, and your seatbacks in their full, upright position. Blessings, TFG
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Post by TradingForGod on Aug 25, 2004 11:37:15 GMT -5
Just a quick note on Azco Mining since CT put out a special update. The chart below shows the six month trading range for this stock. Several things are readily apparent. First, it has not gone anywhere in that time. The basing continues. Second, it is currently in the low end of the congested trading range and is right at the lower Bollinger Band. Momentum is extremely neutral right now, and the ADX trend indicator is weak (absent the bad tic from a couple of weeks ago). Based on our congestion trading model, this is a good place to pick up some length if you are so inclined. The technical stop for this length is a stop below 9 cents. But, and this is important, if you have special knowledge or a long term view, this negates the stop exit. It is just a technically significant level. Hope this is helpful. God bless you all. TFG
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AZMN
Aug 25, 2004 11:37:15 GMT -5
Post by TradingForGod on Aug 25, 2004 11:37:15 GMT -5
Just a quick note on Azco Mining since CT put out a special update. The chart below shows the six month trading range for this stock. Several things are readily apparent. First, it has not gone anywhere in that time. The basing continues. Second, it is currently in the low end of the congested trading range and is right at the lower Bollinger Band. Momentum is extremely neutral right now, and the ADX trend indicator is weak (absent the bad tic from a couple of weeks ago). Based on our congestion trading model, this is a good place to pick up some length if you are so inclined. The technical stop for this length is a stop below 9 cents. But, and this is important, if you have special knowledge or a long term view, this negates the stop exit. It is just a technically significant level. Hope this is helpful. God bless you all. TFG
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Post by TradingForGod on Aug 25, 2004 5:52:48 GMT -5
Thar’s GOOOOLLLLD in them thar hills. From as far back in recorded history as you want to go, gold has been a highly sought after prize. It still is today, but with modern extraction methods you no longer have to find golden nuggets in a stream of thick veins in a mountain shaft. Huge earth movers scoop up mountains of dirt containing gold deposits so diffuse you almost can’t see it. And yet when the processing is over you still get beautiful gold bars. That’s pretty amazing to me. Gold has turned into something of an industrial metal, used in electronics and telecommunications as well as optics and lasers. (Did you know that the 21-inch secondary mirrors on the Keck telescopes at Mauna Kea, Hawaii are coated with pure gold?) As a result, it has lost a bit of its “luster” as a boutique metal. Even still, it the most closely followed metal traded in the world. People still look at it as somewhat of bellwether for economic strength and potential inflation. So I thought we would look at it today. Gold has been in a large, uptrend since the start of 2002. It peaked in January of this year and has been consolidating below the lows ever since. The rally from the real beginning of the uptrend (it chopped sideways for a couple of years before that) has pushed gold up from 272 to 403 currently, an increase of 48%. That’s a pretty spectacular rally isn’t it? Well, maybe not. If you read yesterday’s post you probably see some similarity between the chart below and the weekly euro chart we discussed yesterday. Actually, the charts are VERY similar. The euro’s rally has been almost identical to gold’s uptrend. If you look at the bottom of the chart below, you will see the ratio of the gold price to that of the euro. Another way of looking at it is that it is the gold price is euros/ounce. Amazingly, the price of gold in euros is almost flat over the last two and a half years. In fact, the gold price today is EXACTLY what it was in Feb’02, just shortly after the rally began. So how about that? Gold’s big bull market has absolutely nothing to do with gold. It’s all been the devaluation of the U.S. dollar (euro rising). Or maybe the dollar’s collapse has all been because gold has been rallying? Nah! So as we watch for Gold’s next big move, we’ll need to look out for what is going on with the euro. Even though gold remains in an uptrend right now, if the euro falters right here, as it appears it is, we could see gold follow suit. So you gold bugs out there are really currency traders even if you didn’t realize it. But I bet most of you did. Right now key support for gold is at the 20 and 40-day MAs, both at about 400. A close below there is negative, and a close below 390 is outright bearish. Have a blessed day! TFG
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Post by TradingForGod on Aug 25, 2004 5:52:48 GMT -5
Thar’s GOOOOLLLLD in them thar hills. From as far back in recorded history as you want to go, gold has been a highly sought after prize. It still is today, but with modern extraction methods you no longer have to find golden nuggets in a stream of thick veins in a mountain shaft. Huge earth movers scoop up mountains of dirt containing gold deposits so diffuse you almost can’t see it. And yet when the processing is over you still get beautiful gold bars. That’s pretty amazing to me. Gold has turned into something of an industrial metal, used in electronics and telecommunications as well as optics and lasers. (Did you know that the 21-inch secondary mirrors on the Keck telescopes at Mauna Kea, Hawaii are coated with pure gold?) As a result, it has lost a bit of its “luster” as a boutique metal. Even still, it the most closely followed metal traded in the world. People still look at it as somewhat of bellwether for economic strength and potential inflation. So I thought we would look at it today. Gold has been in a large, uptrend since the start of 2002. It peaked in January of this year and has been consolidating below the lows ever since. The rally from the real beginning of the uptrend (it chopped sideways for a couple of years before that) has pushed gold up from 272 to 403 currently, an increase of 48%. That’s a pretty spectacular rally isn’t it? Well, maybe not. If you read yesterday’s post you probably see some similarity between the chart below and the weekly euro chart we discussed yesterday. Actually, the charts are VERY similar. The euro’s rally has been almost identical to gold’s uptrend. If you look at the bottom of the chart below, you will see the ratio of the gold price to that of the euro. Another way of looking at it is that it is the gold price is euros/ounce. Amazingly, the price of gold in euros is almost flat over the last two and a half years. In fact, the gold price today is EXACTLY what it was in Feb’02, just shortly after the rally began. So how about that? Gold’s big bull market has absolutely nothing to do with gold. It’s all been the devaluation of the U.S. dollar (euro rising). Or maybe the dollar’s collapse has all been because gold has been rallying? Nah! So as we watch for Gold’s next big move, we’ll need to look out for what is going on with the euro. Even though gold remains in an uptrend right now, if the euro falters right here, as it appears it is, we could see gold follow suit. So you gold bugs out there are really currency traders even if you didn’t realize it. But I bet most of you did. Right now key support for gold is at the 20 and 40-day MAs, both at about 400. A close below there is negative, and a close below 390 is outright bearish. Have a blessed day! TFG
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Post by TradingForGod on Aug 24, 2004 8:36:41 GMT -5
Today we’ll take a look at the euro. We won’t spend a lot of time on it because I don’t imagine many of us actually trade in the foreign exchange (forex) market. However, relative currency valuations say a lot about the interest rate picture and money flows between regional economies. Before the euro started trading, there were a lot more currency relationships to follow, but now the German Mark, Italian Lira, etc. have gone the way of the Dodo. Other than the British Pound and the Swiss Franc, the Euro is really “it” to determine the relative strength of the US and European markets. You can see from the weekly chart below that the euro has been in a relentless uptrend (US dollar declining) for more than two years. The market peaked last February and fell steadily into late April when it hit, and held, the major uptrend support line. Since that time it has essentially ridden the support line higher and in mid-July peaked again at the 62% (Fibonacci) retracement of the initial sell-off. Note too how it stalled RIGHT AT the upper Bollinger band. By then, the uptrend had weakened to the point that a sale into that band was a very good opportunity. The euro has chopped sideways since then, briefly violating trend support. In the last week it has fallen below the trendline yet again. Note how the 20 and 40-week MAs have flattened out. It’s hard to see on this chart, but the 20-week MA is below the 40-week MA for the first time in over two years. That’s not particularly positive either. It looks to me like the euro is getting ready for another extended sell off that should take it down to at least the November low near 1.13. It could also fall back to the Aug’03 low just over 1.07. This sell off could talk several months to develop. Again, I am no economist, but generally speaking as the euro falls (dollar rises), US interest rates go up. That could have a negative impact on equity markets as it makes bonds a more attractive investment vehicle. Money could flow out of the stock market to be reallocated to the “safer” treasury market. But heh, what do I know. You can get a better analysis of that phenomenon by watching CNBC, or for sure reading Savant’s column. In any event, the euro chart is one more reason that I continue to be a little cautious about the overall equity picture at the moment. We’ll see if that caution is warranted or not. God bless you all, TFG
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Post by TradingForGod on Aug 24, 2004 8:36:41 GMT -5
Today we’ll take a look at the euro. We won’t spend a lot of time on it because I don’t imagine many of us actually trade in the foreign exchange (forex) market. However, relative currency valuations say a lot about the interest rate picture and money flows between regional economies. Before the euro started trading, there were a lot more currency relationships to follow, but now the German Mark, Italian Lira, etc. have gone the way of the Dodo. Other than the British Pound and the Swiss Franc, the Euro is really “it” to determine the relative strength of the US and European markets. You can see from the weekly chart below that the euro has been in a relentless uptrend (US dollar declining) for more than two years. The market peaked last February and fell steadily into late April when it hit, and held, the major uptrend support line. Since that time it has essentially ridden the support line higher and in mid-July peaked again at the 62% (Fibonacci) retracement of the initial sell-off. Note too how it stalled RIGHT AT the upper Bollinger band. By then, the uptrend had weakened to the point that a sale into that band was a very good opportunity. The euro has chopped sideways since then, briefly violating trend support. In the last week it has fallen below the trendline yet again. Note how the 20 and 40-week MAs have flattened out. It’s hard to see on this chart, but the 20-week MA is below the 40-week MA for the first time in over two years. That’s not particularly positive either. It looks to me like the euro is getting ready for another extended sell off that should take it down to at least the November low near 1.13. It could also fall back to the Aug’03 low just over 1.07. This sell off could talk several months to develop. Again, I am no economist, but generally speaking as the euro falls (dollar rises), US interest rates go up. That could have a negative impact on equity markets as it makes bonds a more attractive investment vehicle. Money could flow out of the stock market to be reallocated to the “safer” treasury market. But heh, what do I know. You can get a better analysis of that phenomenon by watching CNBC, or for sure reading Savant’s column. In any event, the euro chart is one more reason that I continue to be a little cautious about the overall equity picture at the moment. We’ll see if that caution is warranted or not. God bless you all, TFG
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Post by TradingForGod on Aug 23, 2004 9:31:51 GMT -5
The equity market continues higher all last week after staging a decent short-term reversal on Monday. Friday’s solid up day maintained the upward bias as the Nasdaq closed solidly above the 20-day MA for the first time since July 2nd. The 40-day MA at 1881 is next resistance overhead followed by the correction target at 1904 we talked about last week. The market could make a beeline straight to those numbers, but it doesn’t have too. In fact, I would be kind of surprised if it did. The intra-day Nasdaq charts suggests that equities are getting a little overbought short-term, and could be ready for a fair sized pull-back. Initial support is at the minor uptrend line at about 1830. If this support fails, and I think it very well could, the next target is down at about 1810. This is the 38% (Fibonacci) retracement of the rally so far. It is also very near Thursday’s swing low. This support might well contain any sell-off, but the Nasdaq can fall all the way to 1787, the 62% retracement, and still be okay technically. Any weakness below there puts the point-of-view (POV) for a continued rally into better overhead resistance at grave risk. {I don't seem to be able to post an image of the intra-day Nasdaq chart this morning, so I have included a hyperlink below that will take you to the chart.} home.houston.rr.com/tradingforgod/082304.GIFRemember that for now we cannot count on this rally to be anything more than a corrective bounce after the big sell-off so far this year. It COULD be much more than that, but it will take a move back over 2000 to make that the most likely scenario technically. The daily trend is solidly DOWN right now, so the market has some work to do to turn that around. A brief correction here that holds key support between 1810-1787 would be a GREAT first step. God bless, TFG
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Post by TradingForGod on Aug 23, 2004 9:31:51 GMT -5
The equity market continues higher all last week after staging a decent short-term reversal on Monday. Friday’s solid up day maintained the upward bias as the Nasdaq closed solidly above the 20-day MA for the first time since July 2nd. The 40-day MA at 1881 is next resistance overhead followed by the correction target at 1904 we talked about last week. The market could make a beeline straight to those numbers, but it doesn’t have too. In fact, I would be kind of surprised if it did. The intra-day Nasdaq charts suggests that equities are getting a little overbought short-term, and could be ready for a fair sized pull-back. Initial support is at the minor uptrend line at about 1830. If this support fails, and I think it very well could, the next target is down at about 1810. This is the 38% (Fibonacci) retracement of the rally so far. It is also very near Thursday’s swing low. This support might well contain any sell-off, but the Nasdaq can fall all the way to 1787, the 62% retracement, and still be okay technically. Any weakness below there puts the point-of-view (POV) for a continued rally into better overhead resistance at grave risk. {I don't seem to be able to post an image of the intra-day Nasdaq chart this morning, so I have included a hyperlink below that will take you to the chart.} home.houston.rr.com/tradingforgod/082304.GIFRemember that for now we cannot count on this rally to be anything more than a corrective bounce after the big sell-off so far this year. It COULD be much more than that, but it will take a move back over 2000 to make that the most likely scenario technically. The daily trend is solidly DOWN right now, so the market has some work to do to turn that around. A brief correction here that holds key support between 1810-1787 would be a GREAT first step. God bless, TFG
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Post by TradingForGod on Aug 21, 2004 11:38:02 GMT -5
Arguably the biggest questions facing the economy right now are how high energy prices will go, and how chronically high prices will affect the rate of economic expansion. I am no economist. I am just a technical trader. So I will leave it to the deep thinkers to wrestle with the macro-economic uncertainties of the relationship between oil prices and economic growth. But I will try to wrestle, and wrestle is the word, with the question of how high energy prices might go. But first a little history. From its low just over $10 in late 1998, West Texas Intermediate (WTI), the US benchmark crude type, has almost quintupled in value. There aren’t a lot of things that increase in value five-fold in less than six years. But that’s sometimes the nature of commodities markets. Demand goes up or supply goes down or both, and price has to compensate. In the 1973 Arab Oil Embargo, crude went up in % terms much faster than today. In the lead up to the Gulf War, prices more than doubled in just three months. And on the downside, the Saudi netback pricing policy in the mid-80s cut oil prices by 2/3 in four months. What makes this rally unique is that there has been no real “supply shock” to cause it. Certainly Iraq is producing well below its maximum capacity, but that’s no different than when crude was trading $20/bbl. But something is sure different. For the entire decade of the 1990s, crude oil traded at an average price of about $19/bbl. Yes, there were spikes like the Gulf War and big dips like the 1998 price collapse (remember sub-$1 gasoline?). But if you looked at a VERY long term moving average, it was pretty much flat at about $19. Prices spent as much time above the average as below it. But since the turn of the century (isn’t it hard to think of that as a recent event…I still think of that as from the 1800s to the 1900s…I guess I really am old), there has been a radical shift. World energy prices have been in an unprecedented uptrend. The long-term MA that was flat for a decade is pointed sharply higher now. Even in the absence of a “see change event” (the Iraq War does NOT count), prices have been in an unremitting, though choppy, uptrend for six years. This rally seems to have been caused by the growing realization that there has been a fundamental tightening of the overall supply/demand balance for energy. The weekly chart below shows just the most recent leg of this uptrend. Going back to late 2001, crude prices fell to $17 from a high of almost $38 just a year earlier. And that peak was a low of $10 just two years before that, so the seeds of this high volatility were planted years ago. Prices rallied to $40/bbl in early 2003, with a $15 increase coming in the three months leading up to the Iraq War. When it became apparent that the Iraqi oil fields were safe, prices collapsed dramatically, at one point falling $10 in a week. Now THAT’S volatility. After about six months of choppy, sideways price action, crude started to really rally in Sep’03. It was at about $27 then, and within nine months it was $15 higher at over $42, what was then a new all-time high. A number of technical analysts, myself included, called for a reversal lower at that point because there was a severe momentum divergence on the daily chart and the daily MAs had flattened out. Plus, the speculative “funds” were very long energy then and had spent almost a month with no net appreciation. They took the opportunity to take profits and prices fell back almost $7 in a little over a month. You probably remember gas prices falling a little right before the 4th of July. From there, prices have rallied at ever increasing speed. This week, crude for September delivery expired at almost $48 after briefly trading up to 49.40 early on Friday. The chart below shows that this is right at the top of a parallel channel off the ’01 and ’03 lows. In addition, it is also right at the “normal” swing target from the big rally last year (dashed blue line). Crude oil has achieved pretty much every conceivable target, and then some. The rally over the last two months has taken on the characteristics of a “blow off top” with panic buying evident. These types of rallies almost always end with an explosive crescendo and are followed by an equally implosive collapse. So am I saying the top is in? Not at all. It MIGHT be. It certainly COULD be. But trying to call the top of a runaway market is one of the toughest things a technical trader can try to do. Right now all I can do is point out things to look to give clues the reversal is upon is. The first will be a violation of SOME moving average support. You can see from the chart above that prices are well above even the fastest MA. This is true of the daily chart as well. The 7-week MA (orange line) should be at about 44.60 next week. A weekly close below there would be the first in two months and could trigger a big sell off. Note how in early 2003 a close below this MA immediately preceded a huge collapse in crude prices. I am really going to be watching for this. Another thing I am watching is the net long position of the “spec” traders. The Commodity Futures Trading Commission (CFTC) puts out a weekly Commitment of Traders report that shows long and short positions divided by Commercial and Non-Commercial traders. While these categories are very broad, in general the Non-Commercials are thought to be more speculative traders rather than companies hedging a physical position to satisfy a business need. For instance, an oil company selling crude to lock in a profit on their oil production would be a hedger, a “Commercial” trader. A hedge fund who is long crude oil just because they think it is bullish would be a speculative trader, a “Non-Commercial.” Anyway, back in June before the $7 sell off, the specs were very long energy futures. Right now, with oil prices $7 higher that back then they are only about ½ as long. It seems that the specs are using this most recent rally to reduce there long exposure. Back in 1998 as oil prices pushed down to $10 the same thing happened. The specs had been very short, but as prices made their last dip they got out of most of their positions. This behavior could be a sign of an impending reversal too. Also, oil issues like Exxon/Mobil, Chevron/Texaco, etc. are all well off their recent highs even as crude prices have continued to climb. Is the market smart enough to begin discounting future oil company earnings because it believes oil prices are about to head lower? This is something to watch as well. But frankly, unless there is some “event” like peace breaking out in the Middle East, I think we are at least a week away from any kind of major reversal. The moving average structure is still too bullish and the ADX trend indicator is too strong. We may not go much higher from here (though we might), but I think prices have to spend a little more time in this general area before they have a chance to stage a meaningful reversal. The trend is your friend, and right now the trend is decidedly up. The next time we talk about energy, I will look at a much shorter term view as we try to hone in on a reversal set-up. Blessings to you all, TFG
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