Martin Pring s. Weekly InfoMovie Report. December 19, 2012

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1 Martin Pring s Weekly InfoMovie Report December 19, 2012 Issue 1027 Merry Christmas to All! And may 2013 bring joyous Blessings and your Family know Joy and Peace! The Pring Family ~ 2012 Weekly InfoMovie Report 1

2 Pinocchio bar US Equity Market - In the previous issue I pointed out that last Wednesday s action was a one-day price pattern known as a Pinocchio, since its failure to hold above this trendline represented exhaustion, the market was likely to decline or experience a trading range for the next 5-10 sessions. 2 Weekly InfoMovie Report

3 I said in referring to a ruptured trendline, Now the price has moved back to the line where it s likely to find resistance. If it can rally through and the price can take out the Pinocchio high, that would be a set up for an upside run, but as things stand at Wednesday s close, that seems unlikely to happen. Now, a week later, it is back to the line but struggling to break through. That line continues to represent resistance. Weekly InfoMovie Report 3

4 Breakout On the other hand, on Tuesday the price took out the Pinocchio high, so we have a mixed picture, based on those two indications. However, elsewhere the balance of evidence is more encouraging. For instance, the number of new 52-week highs has started to break to the upside, which is also positive. 4 Weekly InfoMovie Report

5 Still subdued and not overbought. This more optimistic view is supported by the fact that the diffusion indicator we looked at last week is still at a subdued level and therefore has plenty of room before it s likely to become overbought. Weekly InfoMovie Report 5

6 Marginal new high Other breadth data are supportive of higher prices as the NYSE A/D Line has registered a new high. Even the upside downside volume line has come to life. Not only has it violated this down trendline, but when the A/D line was moving sideways this laggard continued to move higher. 6 Weekly InfoMovie Report

7 Breakout Bullish Some of my confidence relationships have come to life again. The ratio between the high Yield and Barclay s 20-year Trust helped signal these peaks with their relatively weak action. Now this confidence series has broken out in favor of high yield bonds and its KST is bullish. Confirmation, though, as we have previously seen, needs to come from a decisive move back above this key up trendline. Weekly InfoMovie Report 7

8 Another way of looking at confidence is to observe the behavior of the relative action of consumer staples. They are a defensive group, so when they are out- performing it s a sign of a lack of confidence and vice versa. The RS line has been plotted inversely here to correspond with price movements in the S&P Composite. The series in the bottom panel calculates the difference between the KST for staple relative action against that of the S&P. When it crosses above zero it indicates the S&P is outperforming the relative staple momentum; a bullish sign as these arrows attest. Also, when we see joint trendline breaks to the upside like this, it tends to be bullish. As you can see, both series have just flashed buy signals. 8 Weekly InfoMovie Report

9 Important breakdown Bearish Tried but failed to go bullish. Bearish Credit Markets - Last week we saw that the Barclay s Aggregate Bond Fund, the AGG, had violated a 2-year up trendline. This week, the 7-10 year trust, the IEF, followed suit with a break of its own. Note that the short-term KST is bearish, as is its long-term counterpart. More intriguing to me is the fact that the intermediate series recently tried to go bullish from just above the equilibrium level but failed. This type of setup is often followed by an above average move. For example, we saw this at the 2007 equity peak. I am not saying that bonds will sell off sharply, merely that if investors lose confidence because of fiscal worries or inflationary fears, the technical position is likely to oblige them. In any event, whatever the character, bond prices look vulnerable. If you want a fail-safe, look no further than a close below the bottom of the recent trading range at $ Weekly InfoMovie Report 9

10 S H S? Bearish Currencies - The Dollar Index is almost at the neckline of a potential head and shoulders top at 79. Its short term oversold as we can see from the stochastic in the bottom panel, but both it and the KST continue to fall. It s a closer call this week but I still think the odds narrowly favor a top completion, though this may come after a small retracement rally. 10 Weekly InfoMovie Report

11 Line is around $175. S? S H Bearish Precious Metals - The Gold ETF, the GLD, may be in the process of completing this inverse head and shoulders, but that would take a close above $175 which seems a long way off. For not only are both momentum indicators bearish, but the price has violated this small up trendline. A cautious stance is appropriate until this right shoulder down trendline at $167 is penetrated on the upside. Weekly InfoMovie Report 11

12 Line is around $170. S H S? Both are bullish. The platinum ETF, the PPLT, is also threatening to trace out a reverse head and shoulders. However, Platinum, I think, is a better bet, as the Platinum Share ETF, PLTM, has just violated this important down trendline. Also, both the KST for the physical metal ETF and the shares are in a bullish mode. 12 Weekly InfoMovie Report

13 Declining Fine balance Commodities - The Dow Jones UBS Commodity ETN, the DJP, remains well below this resistance barrier at around $45, but it is also just above key support in the form of this trendline. Even though the Special K and KST are slightly bearish, it would not take much to reverse their trajectories. The first sign of strength would come from a break above this line, which is currently around $ Weekly InfoMovie Report 13

14 Right on the line Both bullish The stock market is o the verge of voting for higher commodities as the ratio between the IGE and the XLP is right at a crucial down trendline. As you can see, the CRB Composite has already violated its down trendline and both KSTs are bullish. Higher prices are therefore likely. 14 Weekly InfoMovie Report

15 Marginally bullish Have you noticed the media has been focusing on the fact that gas prices have dropped recently? To me, that s a negative as a driver and therefore bullish for gas prices. See, the gas ETN has violated a small down trendline and the KST has gone bullish. Contrary opinion and the technicals say higher prices lie ahead. Weekly InfoMovie Report 15

16 In Summary: 1. Confidence ratios, breadth and the cancellation of last week s exhaustion day suggests higher equity prices. 2. Bonds continue to break down. 3. Commodity markets are at a make-or-break point. 16 Weekly InfoMovie Report