Monthly Issue: February 2013

Transcription

1 Monthly Issue: February - US INDEXES - INTERNATIONAL INDEXES - COMMODITIES 6 CURRENCIES 7 BONDS 8 SUMMARY EURO SIGNALS By only a razor-thin margin the SPY managed to settle the month of January above a + year channel top (9., upper right), In A Nutshell: which In on A Nutshell: its own would beg to question the viability of such a long-term buy signal. However, when considering the broader market, and the fact the SP- cash index (.INX), the Dow, and Russell- all managed to more convincingly post the same buy signal, we can begin to make strong assumptions regarding the next - year directional dynamic. Yes, the underlying economy will seek its own course over the next several years, and may indeed lethargically plod along as it has the last several. Though concerning the US stock market itself, we appear to be in the midst of a secondary bull run that may carry us into later decade. The breadth and sustainability of this move may well duplicate that of the post-9 run to present. Assuming the SPY, DIA, and IWM all proceed higher over the next several weeks and post positive end-of-february settlements, we should over the next -8 months reach 6.97 in the SPY, 6. in the DIA (both right), and. in Next page: US Indexes MACD (6.688) - SPDR S&P ETF Trust (.,.9,.7, 9., ) 9 SPY: SPDR S&P ETF SPY TECHNICAL SUMMARY: February support at 9. can contain selling through and beyond, above which 6.97 remains a -8 month objective, 7. expected over the next - years. On the other hand, an end-of-february settlement back below 9. should yield. within several months, 8.6 attainable into the latter half of this year. DIA : SPDR Dow Jones ETF Relative Strength Index (66.9) Relative Strength Index (.97) MACD (.9) SPDR Dow Jones Industrial Avrg ETF Trust (.99,.,.7, 8., +7.) DIA TECHNICAL SUMMARY: February support at 6. can contain selling through and beyond, above which 6. remains a -8 month objective, 9. expected over the next - years. On the other hand, an end-of-february settlement back below 6. should yield. within several months,.69 attainable into the latter half of this year

2 US INDEXES CONTINUED the IWM (immediate right), these fouryear ascending channel tops able to contain quarterly highs when tested possibly into later. Longer-term, all three of these major market indexes are poised to essentially double their preceding tenyear range over the next - years, which would imply a long-term objective in the SPY at 7., the DIA at 9., and the IWM at 8.. If the broader market happens to back off in February, and settle below the horizontal formations illustrated at 9. (SPY), 6. (DIA), and 87. (IWM) respectively, such a failed buysignal would in fact elicit a valid sell signal into Q, and over the next - months the SPY should slip back to., the DIA to., and the IWM down to 77.. The QQQ at immediate right continues to congest along in a one-year range. Nevertheless, on a purely technical basis it s merely marking time following the January, longer-term buy signal above its own -year formation - currently at Holding above maintains a favorable outlook into -, for over this time horizon this tech-sensitive index is expected to reach into the lower 9. s. Russell : ishares Trust Russell Index Fund (IWM) Monthly Chart back to A Relative Strength Index (6.6) MACD (.97) ishares Trust Russell Index Fund (86., 9., 86., 89., +.6) QQQ : PowerShares Trust - monthly chart back to 999 B Relative Strength Index (6.8) MACD (.8686) PowerShares QQQ Trust Series (66.69, 67.79, 66., 66., +.799) = 6% A - B INTERNATIONAL INDICES Relative Strength Index (.897) ISHARES EURO MONETARY UNION INDX (EZU) Last December s buy signal (above MACD (-.68) the. formation) continues to play out, 8.97 expected over the next - months (last month s illustrated ishares MSCI EMU Index Fund (.,.,.,.7, +.) objective at 9.), yet given January s ishares MSCI EMU Index Fund 7 long-term buy signals that transpired in European Monetary Union Index (EZU) the US Indexes, we re raising our upside consists of stocks from the following countries: Austria, Belgium, Finland, France, Germany, Greece, objective on this Euro stock-index to Ireland, Italy, the Netherlands, Portugal and Spain..7, expected over the next -8 months, able to contain highs, and.7 a tipping-point into. On the other. hand, closing the month of February back below. indicates.77 within - months, the 9,.8 low 9 attainable again within -8 months

3 INTERNATIONAL INDICES CONT. ALL WORLD INDX INCLUDING US (VT): Targeted resistance at.6- can contain strength into later year, once tested the market vulnerable to rotating south into the 6. region within - months,. within -8 months. On the other hand, an end-of- February settlement above. indicates a bullish for this Total World index, the. formation then expected within -8 months, where the global equity market can top out into. Relative Strength Index (6.7) MACD (.98) Vanguard FTSE All World ex US (6., 7.,., 6., +.) Vanguard FTSE All World ex-us (VEU) Relative Strength Index (.) MACD (.) Vanguard Total World Stock (.,., 9.89,., +.) Vanguard Total World Stock (VT)... includes US market..6 - monthly chart back to 8 8 S O N D 9 A M J J A S O N D A M J J A S O N D A M J J A S O N D A M J J A S O N D A M J J A S O N D A M J monthly chart back to ALL WORLD INDX MINUS US (VEU): Though January came close to breaking out, we start February continuing to hold within the two-year wedge convergence between.8 and 6.8, both regions able to contain activity into later, inside of which the VEU maintains a congestive dynamic over this time horizon. On the other hand, an end-of-february settlement above 6.8 indicates a bullish for this broad-based fund, the. formation then expected within -8 months CHINA INDEX (FXI): Last October s buy signal above the long-term.6 trendline continues to play out, targeted resistance at. now in reach via February activity, where this China fund can top out into later, once tested the lower. s in reach again within -8 months. However, an endof-february settlement above. extends the rally for another -8 months into the 6.69 region, where the China can top out into next year. Relative Strength Index (6.87) MACD (-.6) ishares FTSE China Index Fund (.,.9,.,.9, +.) ishares FTSE China Index Fund (FXI) monthly chart back to A M J J A S O N D 8 A M J J A S O N D 9 A M J J A S O N D A M J J A S O N D A M J J A S O D A M J J A S O N D A M J J A S O N D 9 Relative Strength Index (.9) MACD (.9) ishares MSCI Emerging Markets Index Fund (.9,.,.7,., -.) ishares MSCI Emerging Markets Index Fund (EEM) (monthly chart back to 6) J A S O N D 7 A M J J A S O N D 8 A M J J A S O N D 9 A M J J A S O N D A M J J A S O N D A M J J A S O N D A M J J A S O N D A M J J A S O N D A M J J A S O N 9 EMERGING MARKETS INDEX (EEM): A constructive dynamic continues through Q above. (not shown), the targeted formations expected within several months, able to contain highs. A February settlement above 9.6 signals.8 within -8 months, likely to contain strength into. Downside, a monthly settlement below. signals a good high into Q, the 6. speed-line then expected within several months, able to contain selling through.

4 Relative Strength Index (.96) MACD (.) PowerShares DB Commodity Indx Trckng Fnd (8., 8.9, 7., 8., +.) PowerShares DB Commodity Index Tracking Fund (DBC) ( most heavily-traded global commodities) monthly chart back to A S O N D 8 A M J J A S O N D 9 A M J J A S O N D A M J J A S O N D A M J J A S O N D A M J J A S O N D A M J J A S O N D A M J COMMODITIES PwrShares Commodity Index (DBC): A February ceiling at 9. can contain buying into Q, below which the base of the same formation at. remains vulnerable to testing over the next - months, able to contain selling through. Upside, a February settlement above 9. shifts the focus decidedly bullish into Q, the.7 formation then expected by mid-year, able to contain highs. SPDR Gold Trust (GLD): GLD continues to wedge between long-term support at 8.9 and midterm resistance at 7.6. Holding above 8.9 maintains a bullish thrust through, with a Feb settlement above 7.6 accelerating upward momentum into later year, 86.7 then expected within - months, 7. within -8 months. Downside, a Feb settlement below 8.9 should mark a good high,.8 expected within - months, the.8 formation attainable by year s end. SPDR Gold Trust (GLD) Back to Relative Strength Index (6.) MACD (8.) SPDR Gold Trust (6.9, 6., 8.89, 6.9, +.) ishares Silver Trust (SLV) monthly chart back to 6 Relative Strength Index (.) MACD (.79) ishares Silver Trust (.,., 8.6,., +.9) IShares Silver Trust (SLV): A nearly two year wedge pattern continues between 8. and 6.7. Both areas can contain activity into nd Qtr trade, inside of which a directionless, two-sided dynamic reigns over this time horizon. A Feb settlement above 6.7 signals a good low, 7. then expected within -8 months. Downside, a Feb settlement below 8. signals within - months,. attainable into later, able to contain selling well into Barclays IPath Copper Indx (JJG): The three year head-and-shoulders top continues to proceed below 6.86, the.8 neckline attainable within several months, able to contain selling through summer (building season). A Feb settlement below.8 signals bearish follow-through into later,.77 then expected within - months, 8. into later. Upside, a Feb settlement above 6.86 signals a good low,.66 then expected within - months, a retest of the Relative Strength Index (8.9) MACD (-.66) BrclysiPth DJUBS CopperSbidxTtlRtrnSMETN (7., 7.9,., 6.9, +.) ipath DJ-UBS Copper TR Sub-Idx ETN (JJC) H S S (neckline) monthly chart back to , high into later year. 7 9

5 Relative Strength Index (.796) MACD (-.6978) PowerShares DB Oil Fund (6., 7., 6., 7., +.) PowerShares DB Oil Fund (DBO) (tracks performance of Light Sweet Crude) COMMODITIES CONTINUED PowerShares DB Oil Fund (DBO): December s buy-signal continues above., 9. expected via Feb trade, where the market can pause for a month or two. Nevertheless, the next -8 months should yield a test of.8.7, where this Crude based ETF should top out into. Downside, a surprise end-of-february settlement below. signals - months of bearish continuation into the 8.-9 region, likely to contain lows. US Natural Gas Fund LP (UNG) While this market is no longer depreciating at the accelerated rate witnessed in the year from July 8 to July 9, it has yet to post a meaningful buy signal over the last four years. The. formation represents resistance able to contain strength into Q trade, below which a retest of the., low is expected within - months. Upside, a Feb settlement above. presents a nice buy opportunity into later, expecting.8 within -8 months. Relative Strength Index (8.) MACD (-.7) United States Natural Gas Fund LP (8.,., 7., 8., -.) United States Natural Gas Fund LP (UNG) monthly chart back to 9. p Oct Nov Dec Mar Apr May Jun Jul Aug Sep Oct Nov Dec Mar Apr May Jun Jul Aug Sep Oct Nov Dec Mar Apr May Jun Jul Aug Sep Oct Nov Dec Mar Apr May Jun Jul Aug Sep Relative Strength Index (9.8) MACD (-.899) Brclys ipth DJUBS CtnSbndxTtlRtrnSMETN (9.9,., 8.,.8, +.) Dow Jones-UBS Cotton Total Return Sub-Index ETN (BAL) monthly chart back to A M J J A S O N D A M J J A S O N D A M J J A S O N D A M J J A S O N D A M J J A S O N D A M J J A S O Barclays ipath Cotton Indx (BAL): January posted the first clear buy signal (above the 6. formation) in two years, an event that should push this Cotton fund into the upper. s over the next -8 months. A resistance area this month at 7. (not illustrated) can temper bullish enthusiasm into next month, yet a Feb settlement above 7. should accelerate upward momentum, the targeted region then expected within - months, able to contain highs. Barclays IPath Grains Index (JJG): The.96 formation can contain February highs, the market vulnerable to testing the more meaningful.7-7 region within - months, able to contain lows and above which a clear upward bias continues into later year. Upside, a February settlement above.96 reverses the current - month descent, momentum then shifting upward over the same time horizon into the 68.9 region, where this index of Corn, Wheat, and Soybeans can top out into later year. Relative Strength Index (.9) MACD (.68) BrclysiPth DJUBS GrainsSbidxTtlRtrnSMETN (.,.,.,., +.) Barclay's IPath DJUBS Grains Total Return (JJG) (a combination of Corn, Wheat, and Soybean futures) monthly chart back to A M J A S O D 9 A M J J A S O N D A M J J A S O N D A M J J A S O N D A M J A S O D A M J A S O D A MJ J A S O

6 CURRENCIES Euro Currency (FXE) Last December s buy signal continues to play out, with continued monthly settlements above the 7.7 formation likely to yield the 6. channel-top within -8 months. For February, 7.7 is attainable (not shown) and able to contain monthly highs. An end-of-february settlement above 7.7 accelerates momentum, the targeted 6. formation then expected within - months, able to contain highs. monthly chart back to 8 Relative Strength Index (.6) MACD (-.) PowerShares DB US Dollar Index Up (.,.,.,.6, -.9) PowerShares DB US Dollar Index Up (UUP) (tracks Deutch Bank US Dollar Index) MACD (-.78) CurrencyShares Euro Trust (.,.8, 9.,.7, +.999) FXE: Currency Shares Euro Trust (Euro/USD) monthly chart back to A M J J A S O N D 9 A M J J A S O N D A M J J A S O N D A M J J A S O N D A M J J A S O N D A M J J A S O N D A M J J A S O Relative Strength Index (.898) US Dollar (UUP): While it could be considered too close to call in terms of sell signal viability, given the US equity indexes are posting meaningful buy-signals into later (reducing flight to quality dynamic), we ll cautiously "go with this sell signal. Holding below.7 should yield the 9. formation over the next -8 months, likely to contain selling into. Upside, an end-of- February settlement back above. neutralizes the outlook into Q,.7 then attainable within -8 months. 9 9 Canadian Dollar (FXC): The.8. region can contain strength into later, below which the 9.8 formation is expected over this time horizon. On the way down, 97. can contain selling through Q, with a February settlement below 97. indicating 9.8 within - months, able to contain a low. Upside, a February settlement above. indicates a bullish for the CD, the.-.9 area then expected within -8 months, able to contain strength through. Relative Strength Index (.88) MACD (.68) CurrencyShares Canadian Dollar Trust (.,.9, 98., 99.9, -.) Currency Shares Canadian Dollar Trust (FXC) month chart back to S O N D 7 A M J J A S O N D 8 A M J J A S O N D 9 A M J J A S O N D A M J J A S O N D A M J J A S O N D A M J J A S O N D A M J J A S O N D A M J J A S O N D A M J J Relative Strength Index (.66) MACD (-.6) CurrencyShares Japanese Yen Trust (.,.9, 7., 7., -.) CurrencyShares Japanese Yen Trust (FXY) monthly chart back to * * 99.8 = 6% of 7- extremes Japanese Yen (FXY): The January sell signal below should yield.8 over the next - months (possibly via February trade), 99.8 expected within - months, it being the start of a wide zone of support down to able to contain lows. Next month we ll illustrate the J-Yen futures chart, showing price activity back to 99. It correlates well with firm support in the region, a targeted zone able to contain selling into. 6 7 M J J A S O N D 8 A M J J A S O N D 9 A M J J A S O N D A M J J A S O N D A M J J A S O N D A M J J A S O N D A M J J A S O N D A M J J A S O N D

7 BONDS / INTEREST RATES The three Bond ETF charts illustrated on this page show, in descending progression, the rough - year maturity dynamic of the US, Europe, and Emerging Markets. All are representative of tradable exchange products. Both the US (top) and Emerging Market (bottom) are approaching meaningful support able to contain selling through Q, if not into later, While the Euro Debt market (middle) remains stable, meaningful resistance in reach via February trade. US: Vanguard Total Bond (BND) The 8. formation can contain Q selling pressures, once tested long-term resistance at 87.8 attainable within -8 months. However, given the very recent longer-term buy signals posted by the DIA and SPY, we may in fact be witnessing an equally longer-term (- year) Bond market top. That would convey itself following an end-of-february settlement below 8.. Not a likelihood at this juncture, though we certainly could test 8. this month following an early-month violation of 8.. With that said, a February settlement below 8. indicates a good high, the region then expected within -8 months, able to contain an annual low. EURO: Wisdom Euro Debt (EU) Having tested targeted long-term resistance in late October (. formation), the EU remains prone to rotating south to the 787 base over the next -8 months, able to contain a low. Nearer term, two-sided trade is expected this month between.89 and.88. A Feb settlement below.89 signals 9.6 in March, 7.87 within - months, able to contain a low. Upside, a Feb settlement above.88 signals a retest in march of the. formation, able to contain highs. A Feb close above. signals. within 8- months. Emerging Mrkts: PowerShares (PCY) Emerging-market debt encounters meaningful February support at 9.7., able to contain selling into later, above which 6. is expected over the next - months. However, A Feb settlement below 9.7 signals 7.6 within - months, longer-term support able to contain selling into, and an important downside tipping-point over the same time horizon, which if violated should send this debt fund south into the lower 9. region over the following -8 months. Vanguard Total Bond Market (8.7, 8., 8., 8., -.) Vanguard Total Bond Market ETF (BND) U.S. investment-grade market; Intermediate Term (- Years) Q 8 Banking Crisis 7 J A S O N D 8 A M J J A S O N D 9 A M J J A S O N D A M J J A S O N D A M J J A S O N D A M J J A S O N D A M J J A S O N D A M J J A S O N D monthly chart back to 9 Relative Strength Index (.9997) MACD (.86) Relative Strength Index (.7) MACD (.89) WisdomTree Euro Debt Fund (.,.,.,.8, +.6) Wisdom Tree Euro Debt Fund (EU) Euro investment-grade Avg. Maturity :.9 Years NovDec9 MarAprMayJunJul AugSepOct NovDec MarAprMayJunJul AugSepOctNovDec MarAprMayJunJul AugSepOctNovDec MarAprMayJunJul AugSepOctNovDec MarAprMayJunJul AugSepOct Nov PowerShares Emerging Mkt Sovereign Debt Ptfl (PCY) Government Debt of emerging mkt countries Bulk Maturity : - Years Q Relative Strength Index (6.7) MACD (.9) PowerShares Emrgng Mkt Sovereign DbtPtfl (.,.,.,., -.) 8 Banking Crisis M A M J J A S O N D 9 M A M J J A S O N D M A M J J A S O N D M A M J J A S O N D M A M J J A S O N D M A M J J A S O N D M A M J J A

8 JANUARY SUMMARY BONDS: With the exception of Europe, this asset class continues to maintain an overall long-term upward bias but barely. Last month s corrective slides in both the US and Emerging debt markets certainly poses the need to keep this sector in sharp focus over the coming months, for as the US and European stock markets are poised for continued gains into Q, global fund managers may increasingly shift from debt into equity holdings. Euro debt (EU, previous page) remains susceptible to -8 months of bearish trade following the late October test of long-term resistance. The PCY (also previous page), a composite of emerging market bond holdings, posted its largest monthly decline in nearly a year, yet nevertheless holds above critical mid and longer-term support, continuing to portray a bullish dynamic into later. We ll be watching all three very closely in the coming months, especially the US debt market, for when it decides its long-term high is good, it should reverse in a convincing and sustained manner.. EQUITY INDEXES: The US market as represented by the SP- (SPY), Dow Jones (DIA) and Russell (IWM) all placed meaningful long-term buy signals in January. This signal is fresh, and thus in a delicate phase. We need to see February continue higher for secondary confirmation. If so, on average % gains are expected over the next -8 months, with continued gains expected into the 6-8 time horizon. All bets are off if February closes lower, the market than vulnerable to depreciating roughly -7% over the next - months. Internationally, the European equity-market placed a meaningful end-of-december buy signal, with - months of bullish continuation now expected until reaching an area of resistance able to contain highs. As before, two bullish stand-outs remain the Emerging Market Index (EEM), and the China Index (FXI) - the latter fund quietly posting an October buy signal that should yield gains of 8-9% over the next - months. While the Emerging Market Index can move higher in similar fashion, it lacks the fresh buy-signal dynamic that characterizes the China. A more neutral, contained dynamic continues to characterize both Total World Indexes (page ), with no need for action or involvement on this front until respective signals are elicited. CURRENCIES: By a razor-thin margin the US Dollar posted a -8 month sell-signal at the end of January, and we re in the go with camp given new expectations for continued US stock market appreciation over the same time horizon. On the heels of higher inflationary targets by the Bank of Japan, the Yen placed a solid sell signal in January, expecting continued declines over the next - months before likely bottoming out into (page 6). The Euro currency s (FXE) December buy signal continues to play out, remaining poised for several more months of bullish continuation. The Canadian Dollar continues to face meaningful longer-term resistance, and therefore remains prone to overbought trade into Q (also page 6). COMMODITIES: It remains difficult to characterize the global commodity outlook in a general way. Most remain congestive in nature, or not yet actionable in a directional way. Crude Oil and Cotton are the only exceptions noted in this month s letter, both in the midst of very recent buy signals, both expected to continue higher into Q. Gold and Silver both remain neutral into Q. Approach the commodity markets individually, for fundamental events can trigger technical buy or sell signals irrespective of the other (this month s specific commodity analysis on pages -). We ll be back Monday, March th. Please contact us if there are any Exchange Traded Products you d like to see analyzed on these pages. The information contained in this newsletter is based on or derived from information generally available to the public from sources believed to be reliable. No representation or warranty is made or implied that it is accurate or complete. Any opinions expressed in this paper are subject to change without notice. This newsletter has been prepared solely for information purposes and private circulation and does not constitute any solicitation to buy or sell any instrument, or to engage in any trading strategy.