Newsletter Stocks Bonds Currencies Commodities

1/2/09 - Equities, January starts strong


Daily and Weekly Breadth Summation index (BSI)

Last week I incorrectly expected the SPX to stay below resistance near 920 from overbought conditions, but the Holiday mood prevailed and we exceeded it by 1% or so. This week I expect the SPX to pull back early in the week and rebound later in the week but still close lower. There are signs we may have completed Minor Wave 4 and will soon start a Wave 5 decline to the November lows and probably lower in January.

The Daily BSI has turned down from very overbought levels suggesting weakness early this week. The Weekly BSI remains close to a breakout and this week will be key to push it one way or the other.

My recent performance at predicting the direction of the SPX before the open is below and unless I am too cautious and skip voting, my vote for Monday is Bearish for the SPX but cautious

Firebird - Your Score: 50% [G100 Ranking]

(last 22 sessions: corrects=6, incorrect=6, missed over limit=0)
SessionCorrectIncorrectMissed
01-02-20091/10
12-31-2008
12-30-2008
12-29-2008
12-26-2008
12-24-2008
12-23-20082/10
12-22-20083/10
12-19-20084/10
12-18-2008
12-17-20085/10
12-16-20086/10
12-15-2008
12-12-2008
12-11-20087/10
12-10-20088/10
12-09-2008
12-08-20089/10
12-05-2008
12-04-2008
12-03-2008
12-02-200810/10
Totais6610



Live Intraday Charts

Most of the charts discussed here can be viewed intraday on my Public List at StockCharts.com



Outlook for Monday is mixed to bearish

The blue Put/Call line is trending in a bearish way but the red VIX and white Trin lines are still bullish but overbought suggesting that Wave 5 is probably done and we will drop more than just a pull back to the 900 area. See the NDX minute chart here

Click here for a Printable version of this Chart

Charts courtesy of StockCharts.com




Outlook for the week is overbought and bearish

The white Tick line climbed back to very overbought levels, while the blue Put/Call line is still headed higher in a bearish way suggesting the SPX will finish the week lower with most of the weakness early in the week. See the NDX 15 minute chart here

Click here for a Printable version of this Chart

Charts courtesy of StockCharts.com




Outlook for January is overbought and bearish

The blue Put/Call line has turned bearish from very overbought and the white Tick line may be forming a double top pattern in early January and the last two in early September and November turned out to be very bearish. See the Nasdaq hourly chart here

Click here for a Printable version of this Chart

Charts courtesy of StockCharts.com




Holidays often mark a change in mood and prices

The market has made significant turns within a week of every holiday this year and the StochRSI and overbought conditions suggests that we should head lower into the MLK and Inauguration date of January 20th. The alternative shown in lighter blue is a continued move up to SPX 1000 for Inauguration and MLK day before we roll over.

Click here for a Printable version of this Chart

Charts courtesy of StockCharts.com




Full Moon of January 10th should be a low

Full Moons are statistically lows and the sharp rally from the previous New Moon low suggests we will start to head lower towards the Full Moon.

Click here for a Printable version of this Chart

Charts courtesy of StockCharts.com




Elliot Wave suggests we are completing a Minor Wave 4 top

I often use sentiment indicators like the Put/Call ratio to confirm price counts since they will only differ in the internal divisions and always match the price count at major turning points. From the October 07 high the blue Put/Call line has traced a clear 5 waves into the March 08 low to complete wave 1. The correction into the May 08 high completed wave 2, but the decline into the October 10th low only completed minor wave 3 of 3 and it appears minor wave 4 is complete or will be very shortly. The whole wave 4 correction in sentiment formed a common A-B-C-D-E with wave E dividing into a clear 5 waves back to exceed the May 08 overbought level. Wave 5 down should complete within a week or two of the 7 month cycle low of February 1st.

Click here for a Printable version of this Chart

Charts courtesy of StockCharts.com




Nasdaq Tick suggests a probable top

Both Ticks turned bullish but are quickly becoming very overbought as seen in the Nasdaq chart and suggesting a pull back and probable change of trend soon. See the Nyse Tick chart here

Click here for a Printable version of this Chart

Charts courtesy of StockCharts.com




The Put/Call ratios remain bearish

The Put/Call ratios turned bearish from overbought levels near December 24th suggesting weakness going forward. See the Equity Put/Call chart here

Click here for a Printable version of this Chart

Charts courtesy of StockCharts.com




The Volatility is bullish but completing 5 waves down

Both the VIX and QQV are completing 5 waves down and increasing the odds of a reversal near the cycle date of January 2nd. See the Nasdaq QQV chart here

Click here for a Printable version of this Chart

Charts courtesy of StockCharts.com




The McClellans are bullish but very overbought

The McClellans turned bullish again and became more overbought than at the November 4th cycle high suggesting a reversal lower in January. See the Nasdaq McClellan chart here

Click here for a Printable version of this Chart

Charts courtesy of StockCharts.com




Stocks above their 50 day MA are bullish but very overbought

The percent of stocks above their 50 day MA are still bullish but very overbought and I doubt they can hold up until the next cycle date of January 8th. See the Nasdaq Stocks above 50 day MA chart here

Click here for a Printable version of this Chart

Charts courtesy of StockCharts.com




Stocks above their 200 day MA are turning bullish

The percent of stocks above their 200 day MA are turning bullish and could support a much larger rally in Spring 2009 if they continue to climb past the January 8th cycle date. Nasdaq Stocks above 200 day MA chart here

Click here for a Printable version of this Chart

Charts courtesy of StockCharts.com



Bonds



The 3 month Yield still fearful but shows signs of turning

The 3 month yield is still showing a lot of fear near 0.1% and we need to see this rise significantly above 1.0% to signal a return to more normal credit conditions and the possibility of a lasting Equities rally.

Click here for a Printable version of this Chart

Charts courtesy of StockCharts.com



30 year Yield breaks out of channel

The 30 year Yield broke out of its steep channel and filled the gap in Holiday trading, but I am suspicious since Rates typically stay low for a long time in a debt crisis like now, the 1930's or the 1990's in Japan. We should know soon if we are to see 3.2% next or test the lows again by the cycle date of January 23rd.

Click here for a Printable version of this Chart

Charts courtesy of StockCharts.com





Bonds pull back sharply ahead of January cycle date

Bonds dropped quickly to the first support area ahead of the late January cycle high and will probably test the highs again considering their 30 year Bull market is only due to end in 2009-2010.

Click here for a Printable version of this Chart

Charts courtesy of StockCharts.com


Currencies



The US Dollar rebounds from its 200 day MA

The US Dollar found support close to its 200 day MA near 0.77 and looks headed higher for its January 8th cycle high date but may also extend higher into the Inauguration and the 6.5/13 month PI cycle date of January 20th.

Click here for a Printable version of this Chart

Charts courtesy of StockCharts.com




The US Dollar makes a significant top

The rally in the USD has obviously ended this wave up from the March low and will likely find support soon with the 200 day MA near 77, the previous low near 76 and the previous high and broken down trend near 74. We should rebound into the Inauguration and PI cycle date of January 20th, but we could also continue to decline until January 20th if support levels fail and we are to reach the 74 level as the failing StochRSI suggests.

Click here for a Printable version of this Chart

Charts courtesy of StockCharts.com




The Yen breaks channel

The Yen took out the previous high near 110 and is vulnerable to a further decline to 104 before it finds support., it remains strong and could extend higher to the 120 area before it pulls back to the 100 level in 2009.

Click here for a Printable version of this Chart

Charts courtesy of StockCharts.com




The Loonie is struggling and overbought

The Canadian Dollar is struggling with resistance and could pull back from the overbought conditions before it can break higher and reach further targets.

Click here for a Printable version of this Chart

Charts courtesy of StockCharts.com



Commodities



Commodities holding lows on divergences

Commodities lost 20 year support near 240-250 and made a lower low with a higher PPO and StochRSI divergence suggesting we will probably test the 20 year resistance level near 250 in January.

Click here for a Printable version of this Chart

Charts courtesy of StockCharts.com




CRB should rebound into 7 month cycle high

Commodities are very oversold after 6 months of continuous selling and will likely rebound to test the 20 year support/resistance level near 250 or even the 280 level by the next 7 month cycle high of February 6th.

Click here for a Printable version of this Chart

Charts courtesy of StockCharts.com




Oil makes new low on slight divergences

Oil is making deep new lows with slightly diverging indicators, on high volume which can mark turning points and we will probably rally to the 50 area towards the January 14th cycle date.

Click here for a Printable version of this Chart

Charts courtesy of StockCharts.com




Oil near 5.5 month cycle low

Oil is approaching the 5.5 month cycle low and will likely move up into the next cycle high of March 21st and a move back above the key 40 level would suggest it has already started.

Click here for a Printable version of this Chart

Charts courtesy of StockCharts.com




Oil near 5 year cycle low

Oil fell hard to the 1990 and 2000 highs near 40 for the 5 year cycle low of December 08 and has raised doubts on how high the next rally can get for the 5 year cycle high of September 2010.

Click here for a Printable version of this Chart

Charts courtesy of StockCharts.com





Gold reaches 1980 high near 850

Gold reached the first resistance and target near 850 but may need one more push higher before pulling back towards mid to late January.

Click here for a Printable version of this Chart

Charts courtesy of StockCharts.com



Gold is headed for a May 09 high

Gold is completing the first wave up from the October 22nd low and will likely struggle within the 800 to 900 area before it starts the next most profitable wave 3 up into the 14 month cycle high of late May 09.

Click here for a Printable version of this Chart

Charts courtesy of StockCharts.com





Silver is overbought and struggling

Silver broke out with little follow through and is likely to continue testing the 10 level into the next January 8th cycle low before heading higher for the late January cycle high.

Click here for a Printable version of this Chart

Charts courtesy of StockCharts.com



Silver has greater potential into May 09

The correction in Silver was more severe than Gold and the potential for recovery profits are greater since Silver should reach at least the 14 level and probably more by the next 14 month cycle high in late May. The COT's are also showing a configuration seen near previous lows.

Click here for a Printable version of this Chart

Charts courtesy of StockCharts.com