Here's a quick tour of the charts as I see them. I'll summarize the theme I see at the end.
The S&P 500 looks just fine, although a little toppy (look at the RSI and MACD).
The transportation index confirms the S&P 500 strength.
However, the semiconductor index, a seemingly good leading indicator for the general market, has a double-top formation. It looks like a good short to me with a stop at a higher-high.
Here's another leading indicator that has looked dreadful for a while. If the Chinese stock market is not doing well relative to the US stock market, isn't that kind of bad for commodities?
The Baltic Dry Index (BDI), which measures shipping rates for bulk goods, like iron ore, has fallen out of its rising channel and may actually be turning down! That's not too good for the global economic recovery.
Copper looks pretty weak. This seems like a good entry point for a short given how close we are to a really nice stop (that trend line). It may be a low probability trade, but one with a low risk / reward ratio.
Crude oil looks a lot like copper only with an even better formed bearish double top.
Guess the way I see it is as follows:
- The general trend is still higher, but the trend seems to be getting weaker. It seems like going short is a low-probability, but good risk vs reward trade (probably lose a little vs possibly win a lot).
- We are about due for a correction.
- The leading indicator charts I'm following: BDI, FXI/SPY, Copper and Crude oil either are showing weakness or are at a good point for a downturn.
- Unemployment numbers come out while the markets are closed for Good Friday and the general population is thinking about holidays. That's a good day to put out some real stinker numbers.
- The week that follows has auctions of 2 year, 5 year and 7 year T-bonds. That smells of a general market smackdown.
- Will probably go short copper (and maybe crude oil) and probably SMH (the ETF corresponding to SOX) around noon on Thursday this week and we'll see what happens the week that follows. Will probably close the gold long trade at the same time.
- New highs in copper, crude or $SOX calls the trade off.
Let me know what I'm missing.
MontyHigh, www.worldofwallstreet.us
P.S., I'm starting to think about technical analysis (especially across a variety commodities, indices, etc.) as a quick way of doing fundamental analysis. E.g., by looking at the copper and BDI charts you get a look at global industrial action (a fundamental). By looking at 30 year treasury yields you looking at interest rate (and thus monetary) economic action (another fundamental).
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