Market Update April 20, 2015

Transcription

1 SeattleTA provides investment managers with technical analysis of the equity, fixed-income, commodity, and The forecast for a high on April 15 was spot-on (there s no kill switch on awesome!). The monthly MACD is rolling over its signal line. Although not a perfect indicator, the signal comes so infrequently that it is important that long-term bulls sit up and take notice particularly when paired with a negative divergence in RSI Oh, Snap! currency markets. There s no kill switch on awesome! Seattle Technical Advisors The leading authority in Lindsay Market Analysis Market Update April 20, 2015 Ed Carlson, CMT ed@seattletechnicaladvisors.com Seattle Technical Advisors website, PO Box 2415, North Bend, WA 98045, is published as an informational service for subscribers, and it includes opinions as to buying, selling, and holding various securities. However, the publishers of Seattle Technical Advisors are not investment advisers and do not provide investment advice or recommendations directed to any particular subscriber or in view of the particular circumstances of any particular person. ANY REDISTRIBUTION of Seattle Technical Advisors Market Update without the written consent of the publishers of Seattle Technical Advisors is PROHIBITED. Legitimate news media may quote representative passages, in context and with full attribution, for the purpose of reporting on our opinions. Copying and/or electronic transmission of the Seattle Technical Advisors website or content is a violation of international copyright law. Information provided by Seattle Technical Advisors is expressed in good faith but is not guaranteed..

2 Internal Indicators VIX rose 1.31 last week to close at and still below the 50-dma (an important marker for regime change) as well as the Dec bear trend. A short-term cycle high for the VIX is expected during the same time period as the hybrid forecast for a low in equities; Apr Put/Call Ratio (equity only) has rebounded to above its upper Bollinger Band. This is where lows in equities are often found. Past lows have usually not occurred with less than two upward spikes in the ratio, however. McClellan Oscillator fell back below zero on Friday before it had ever exceeded 150. The McClellans refer to +150 as escape velocity as exceeding this level forecasts the beginning of a sustainable uptrend. SPY Volume hit a 13-day high on Friday. A 13-day extreme in volume in the ETF is often seen at a change in trend. This fact, combined with other observations, points to a bounce today followed by a decline into the Hybrid Lindsay forecast for a low later this week. SeattleTechnicalAdvisors.com Page 1

3 Oh, Snap! April 20, 2015 Sentiment AAII Sentiment Survey: The proportion of individual investors describing their six-month outlook for stocks as neutral is above 45% for a second consecutive week for the first time in more than 26 years. Optimism rebounded back above 30%, while pessimism declined. Bullish sentiment rebounded by 3.4 percentage points to 32.1%. Even with the upward move, optimism is below its historical average of 39.0% for the sixth consecutive week. Neutral sentiment declined 2.0 percentage points to 45.1%. This is the first time neutral sentiment has stayed at or above 45% on consecutive weeks since January 20 and January 27, Bearish sentiment (top) declined 1.4 percentage points to 22.8%. This drop puts bearish sentiment at a seven-week low. Rydex Bull Bear Ratio, the ratio of assets in Rydex bull funds vs. bear funds bounced from to last week (bottom). This was prior to Friday s sell-off. Investors Intelligence Bears hit new low for 2015 last week at 13.9%, Bulls 50.5%. SeattleTechnicalAdvisors.com Page 2

4 Hybrid Lindsay April Low Although my Hybrid Lindsay forecasts always assume a small time window surrounds any single-date point forecast, the forecast for a high on April 15 was spot-on. The work of George Lindsay deals with time (not price) and tells us that the pullback following last week s high should be over quickly. There exists a forecast from the basic cycle (5/2/11) for a low near Apr 24. Unfortunately, there is no confirming forecast from the multiple cycle (10/11/07). An inflection point in the Dow without confirmation from both cycles is not without precedent but it doesn t allow for a high level of confidence in the forecast. Fortunately, we have other tools Counting a 222-day interval from the low on Sept 12 targets a turn during the period Apr A high-high-low interval of 53 days from Jan 8 to Mar 2 targets a low on Apr 24. A short-term cycle low is due Apr 22. A six-month cycle low is due the same week as the above dates. Conclusion Expect the Dow to decline into the latter half of this week: Apr SeattleTechnicalAdvisors.com Page 3

5 US Equities Bull Market Equities were down last week; SPX -0.99%, Dow %, NASDAQ -1.28%, and RUT -1.02%. SPX closed just below its 21-dma on Friday and 3-day RSI is holding above 20 so the breakdown is less than convincing so far. Look for support near 2,060 and 2,040. The bottom of the symmetrical triangle passes through 2,060 and the Dec bull trend passes through 2,040 this Friday. SPX upside price target: 2,171. Monthly MACD is rolling over its signal line (bottom). Although not a perfect indicator, the signal comes so infrequently that it is important that long-term bulls sit up and take notice particularly when paired with a negative divergence in RSI Oh, Snap! Cycles: Short-term cycles point to a low near Apr 22. An intermediate-term, cycle high is due in late May/early June. Coppock Curves: Daily and weekly are rising but the monthly is still declining; short-term bullish, long-term bearish. Seasonality: April (in pre-election years) is very bullish. Bradley Model shows turns on Apr 26, May 26 and June 9. SeattleTechnicalAdvisors.com Page 4

6 Europe Bull Market EuroStoxx 50 fell 3.79% to close at 3,604 (below the 21-dma) last week and printed an engulfing bearish candlestick on the weekly chart. BWI turned up in confirmation of the decline and 3-day RSI is below 20; bearish. The detrended oscillator is oversold warning of a bounce today or tomorrow. Friday s drop eliminates the Elliott wave scenario detailed in Friday s Daily Commentary. The Mar 26 low at 3597 is pivotal. A break will confirm expectations for a minimum decline to the 38.2% retracement of the Oct rally at 3,400. A zone of support exists at 3,325-3,400. Expect the index to decline while the Euro rallies through the summer months. Relative performance vs. MSCI World has broken its Feb bull trend. Cycles: The next cycle high is due in early May and is followed by a cycle low in mid-june. Coppock Curves: Daily turned down, the weekly is overbought, and the monthly is rising but not confirming the 2015 highs. Seasonality is very bullish during April. SeattleTechnicalAdvisors.com Page 5

7 Japan Bull Market NKX225 fell 1.28% last week closing at 19,653 below the late March high but still above the 21-dma. The confirmation model remains in a confirmed sellmode but BWI has not turned up yet to confirm the decline. A pullback to the 34-dma at 19,388 would not disturb the uptrend. Longer-term, the 2015 breakout from the pennant formation targets a minimum move to +24,000. Cycles point to a low in mid/late June. Expect the Nikkei to decline as long as the Yen rallies. Relative strength (vs. MSCI World) is holding its break out to new highs implying higher highs will be seen after a correction. Coppock Curves: Daily, weekly, and monthly are all still rising. Seasonality shows a rally in early April but moves sideways for the remainder of the month. TOPIX Banks (bottom) broke out from the triangle on Thursday and continues to rally even in the face of Friday s decline in the Nikkei. Support is at 210. Relative performance (lower) confirms the breakout. TOPIX Small Caps fell on Friday but relative performance has broken its down trend; bullish. SeattleTechnicalAdvisors.com Page 6

8 Emerging Markets MSCI Emerging Markets (EEM) lost 0.42% to close at last week. The short-term price oscillator is still overbought and the Coppock is massively overbought but high enough to expect higher highs with this summer s commodity rally/dollar decline (the DJ UBS commodity index broke its year-long downtrend on Thursday). A bullish head-and-shoulders pattern measures a minimum move to EEM has been forming a triangle since its high in An upside breakout at measures a move to 60. A downside break below measures a move to The fly-in-the ointment is the gap between and If EEM gaps back down below that level it will trigger an island reversal. These patterns forecast a return to the low of the rally that precedes them. In this case that could be or (see 2011 triangle comments). Cycles call for a high during the last week of April and a low in early/mid-may. Longer term, cycles point to an important high in July. Coppock Curves: Daily is rising but overbought. The weekly is rising but the monthly is flat. An important high is due in July. Shanghai Composite (SSEC) gained 6.27% last week to close at 4,287 bringing the gain for the last six weeks to %!!! BWI has fallen into its sell-mode and awaits the trigger from RSI. One good down day should do it but it will have to go down. The detrended oscillator is overbought warning of a pullback today or tomorrow. Friday s surge in volume is additional evidence that a pullback may be seen this week. Look for important resistance from the 61.8% retracement level at 4,400. A pullback to the 55-dma at 3,500 would not violate the bull trend. Coppock Curves: Daily, weekly, and monthly are all rising; very bullish. SeattleTechnicalAdvisors.com Page 7

9 US Treasuries, TNX TNX fell 5.18%% last week to close back at the Apr low at BWI is turning up in confirmation of the decline. Watch for a breakdown below or a breakout above A breakdown is expected to be followed by a return to the Jan low at Cycles: A six-month cycle forecasts a low now followed by a high in Sept. Shorter term look for a high in late May. Coppock Curves: Daily turned down but the weekly is rising. The monthly is still falling but is oversold. Seasonality: 10yr bond prices rally during the first half of April only to collapse to lower lows by early May. The yield spread between 30s and 5s (bottom) has broken the 2014 bear trend. A widening in the spread was seen at the equity bull market highs in 2000 and SeattleTechnicalAdvisors.com Page 8

10 US Dollar Bull Market DXY fell 1.90% last week to close at below the 34-dma and printed a dark-cloud candlestick on the weekly chart; bearish. DXY leaves behind a double top at the Mar high. BWI ticked up in confirmation of the break of the moving average and 3-day RSI is below 20; bearish. A symmetrical triangle measures a minimum move to so there may be one more rally left before the expected downturn finally begins. For now, look for a decline to the support zone at Cycles point to two highs in April. The first came two days early on Apr 15 and the next is expected near Apr 30. Coppock Curves: Daily and weekly are falling. The monthly is still rising (albeit very overbought); bearish. Seasonality: A rally during the first week of April is followed by a decline until early May. SeattleTechnicalAdvisors.com Page 9

11 Euro Bear Market Euro rose 1.76% last week to close at 1.08 on the 34-dma. BWI has not confirmed last week s rally and 3- day RSI is still below 80; bearish. The Coppock never reached a level low enough to expect a tradable bottom in April. Volume has so far failed to show the spike that would be expected near a change in trend. Watch for a possible breakout through the pivotal Mar high at A breakout from resistance there can be expected to see the Euro rally to its 144- dma at Cycles forecast a low during the final week of April. The 61.8% retracement of the 2000 bull market has been breached opening up the possibility for a return to the 2000 low near The break of the descending triangle in Dec forecasts an eventual minimum decline to Coppock Curves: Daily has stopped falling and the weekly is rising. The monthly is still in decline but oversold. This looks like a good set-up for a tradable rally lasting possibly until a long-term cycle high in October. Seasonality shows a decline during the first week of April followed by a nice rally into mid-month. The second half of April moves sideways until a peak in early May. SeattleTechnicalAdvisors.com Page 10

12 Japanese Yen Bear Market Correction JY had its best week since early Jan with a gain of 1.16% to close at BWI turned up on Friday but JY has yet to push through resistance from the Feb/Mar highs at day RSI is above 80; bullish. First resistance is at the Feb. high near followed by the Dec/Jan. highs at A breakout from would allow the Yen to return to the 200-dma and fill the gap at An 8-yr cycle low marks the Dec low in the Yen. However, five waves down imply that the larger trend is also down. For now, expect a multimonth upward correction. Long-term, expect a minimum decline for the Yen to 66.00; the next important low is not due until springtime Coppock Curves; Daily and weekly are rising. The monthly is falling but setting up a positive divergence as it refuses to confirm the end of year new low; bullish. Seasonality A dip early in April is followed by a strong rally into mid-may. SeattleTechnicalAdvisors.com Page 11

13 Crude Oil Bear Market Rally Crude gained $4.10/bbl. last week (best week since June) to close at $ Expect next resistance at The breakout above resistance at $54.00 should see crude rally to near $67/bbl. (the minimum expected 38.2% retracement of the 2014 decline) but the daily Coppock is high enough to expect a high in crude. Look for increased volatility between the US Dollar cycle highs due near Apr 15 and 30. The weekly Coppock confirmed the Jan low. Given the bad oversold nature of its decline we should expect a test of the Mar low (at a minimum) after an upside correction. Short-term Cycles pointed to a low last Friday. It is doubtful that Friday s short pullback qualified as that low. Perhaps it will come early this week. The next high is expected near Apr 30. Coppock Curves: Daily and weekly are rising. The monthly is still in decline but oversold. Seasonality: April is normally very bullish for crude oil. Reuters reports that outflows from four of the largest oil-specific exchange traded funds reached $338 million in the two weeks ended April 8 - the first since September and largest since Jan 2014; contrarian bullish. SeattleTechnicalAdvisors.com Page 12

14 Gold Bear Market Rally Gold lost $1.70/oz. last week to close at $1, and still below the 89-dma. It printed a hanging-man candlestick on the weekly chart (bearish) but 3-day RSI remains above 20 (bullish). Gold appears to be forming a flag formation on the daily chart (top). If triggered by a move above 1, it measures a minimum rally to 1,250. Wait for a close over the 89-dma at 1,212 to confirm the breakout. The 2011 decline (bottom) shows five waves down with the fifth wave confirmed by a positive divergence in relative strength. Five waves down imply another big decline in the future but not before an upward correction (bear market rally). Cycles forecast a low last week followed by a rally into late May. A push above the 89-dma will confirm last Tuesday s low as the cycle low. A declining triangle measures a minimum move ultimately to $950. A 4yr cycle low is not due until mid-2016 keeping the long-term outlook bearish (bottom). Coppock Curves: Daily and weekly are declining. The monthly appears to be rolling over; bearish. Seasonality: Gold moves sideways for most of April after a first week bounce. SeattleTechnicalAdvisors.com Page 13