Martin Pring s. Weekly InfoMovie Report. April 12, 2012

Transcription

1 Martin Pring s Weekly InfoMovie Report April 12, 2012 Issue 993 Weekly InfoMovie Report 1

2 Bearish US Equity Market - Last week I pointed out that this up trendline for the diffusion indicator monitoring a basket of Dow stocks above their 50-day MA had been ruptured. The indicator has corrected quite a bit but it is still a long way from registering an oversold condition. The same can be said for the KST which has also violated this trendline. The Dow itself has found support at this trendline which is likely to hold for at least a few sessions. 2 Weekly InfoMovie Report

3 S H S? Small selling climax/harami/in side bar Another reason for expecting prices to hold lies with this candle volume chart where high activity returns a wider candle and vice versa. Tuesday saw it experience a small selling climax with a wide bar. Also on Tuesday, neither buyers nor sellers could push the price beyond Tuesday s trading range indicating a western inside bar. The candle also registered a Harami. Both patterns indicate a balance between buyers and sellers and a halt in the prevailing trend. That s another reason why this potential right angled broadening formation could actually morph into a head and shoulders top. Weekly InfoMovie Report 3

4 Downslide break This chart backs up the idea that prices will eventually move lower. The Winter Wonderland indicator in the lower panel measures a basket of Dow stocks where the KST is in the Winter position, that is below zero and declining. When a lot of stocks are graded in this way it means that the market is in a strong position to rally as the next phase is for them to experience rising momentum. Since this series moves inversely with prices it s plotted that way here. You can see that when this inversely plotted series bottoms a rally typically develops, and right now it s closer to a sell signal than a buy. Also, this week it violated a trendline and that suggests that more stocks are about to move into winter and that s typically bearish. 4 Weekly InfoMovie Report

5 Ratio below 200- day MA and up trendline. The second reason for being negative lies in the weakness in the ratio between poor quality and high quality bonds, that between the HYG and the TLT. These dashed arrows flag positive and negative divergences between the ratio and the S&P. Red arrows indicate when bond investors are losing confidence as government prices (TLT) are out performing junk(hyg); vice versa for the green arrows. Thus bond market confidence often presages similar trends in equities. That brings us to this huge divergence between the two series that has developed in the last 12-months. Also, the ratio has dropped below its 200-day MA and this dashed up trendline. If bond investors are to be believed, expect more trouble in equities. Weekly InfoMovie Report 5

6 Here are two leading indicators; the Italian and Spanish ETF s. See how the Italian series is extremely close to last fall s low and the fact that the Spanish ETF is well below it. Both markets are now within striking distance of their 2009 lows if you can believe it. Market action sends messages, and this is potentially not a good one obviously for Europe but arguably to a lesser extent for the US. 6 Weekly InfoMovie Report

7 $122.5 and $111.5 are the key Friday close levels. Reversing Stabilizing Credit Markets - A couple of weeks ago, I pointed out the small selling climax in the bond market and called for a probable trading range. That view still holds and is now being reinforced by the sharp reversal in the short-term KST and the stabilizing character of its long-term counterpart. Note this series is still above its EMA as is the price, and that objectively determines a primary bull market. Even so, I still think the ranging action will turn out to be a top. The key Friday close levels in this regard are $ and $ Weekly InfoMovie Report 7

8 200-day MA is at Almost bullish Currencies - Since last week the diffusion indicator for the Dollar Index has almost been joined by KST in the bullish camp. That suggests that Index will move higher. That view would change if this line and the 200-day MA are violated with a decisive drop below Weekly InfoMovie Report

9 S H S? Downtrend intact Bearish but not oversold Precious Metals - Last week we noted that gold shares had completed a major top and that this strongly suggested that the price of gold itself would have difficulty rising. This chart shows a key inflation/deflation ratio, that between gold and bonds (GLD/TLT). It looks as though it is in the terminal phase of completing a massive top, but until it is completed with a decisive daily close that holds below 1.25, it s still a potential formation. However, the ratio is below its 200-day MA and has experienced a series of declining peaks and troughs, two indications of a primary and therefore deflationary bear trend. Note how the Special K appears to be leading the ratio in a southerly direction. It s definitely in a sharp downtrend and almost at a new low. Also, the KST is bearish. How can this be with the government printing so much money. Well just take a look at the declining velocity of circulation featured in the latest IMR and you will find out! Weekly InfoMovie Report 9

10 S H S? Bearish but not oversold Rolling over? Still bearish Commodities - The Dow Jones UBS Commodity ETN is very close to completing this head and shoulders top. I think it will do so because the long-term KST has just resumed its downward trajectory and the short-term series is now bearish. Even the intermediate series has stabilized and let s not forget the price is well below its 65-week EMA. 10 Weekly InfoMovie Report

11 S H S Marginal break We have already had a major deflationary signal from this chart featuring the ratio of inflation to deflation sensitive equities as it has completed a massive top. Note that the CRB Composite typically moves in the same direction as the ratio and now appears to be following it with a downside breakout. Weekly InfoMovie Report 11

12 In Summary: 1. Stocks may continue their holding pattern but are eventually likely to move below Monday s lows. 2. Look for the Dollar Index to rally. 3. Commodity prices are expected to move lower. 12 Weekly InfoMovie Report