SeattleTA provides investment managers with technical analysis of the equity, fixed-income, Stocks dropped and interest rates popped on Fridays payroll report as traders priced in a likely Fed rate hike in June. But Wall Street needs to be profitable every day and will likely play the long side until much closer to the June Fed meeting. It s the crazy life! commodity, and currency markets. Livin La Vida Loca! Seattle Technical Advisors The leading authority in Lindsay Market Analysis Market Update March 9, 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..
Internal Indicators VIX bounced from the July trendline (marking the positive divergence seen at major market tops) and gained 1.86 to close at 15.20 but still below the 50-dma (top). The daily Coppock Curve turned up on Friday but the weekly is still overbought. New 52-week lows (center) don t look high enough yet for a bottom in equities but could be there by today s close. Equity-only Put/Call ratio is similar to 52wk lows very close but not quite. McClellan Oscillator closed below -150 on Friday which means we can start looking for a low (bottom). 3-day RSI VIX model is flashing a buy signal. Up/Down Volume Ratio is also flashing a buy signal. Advance-Decline Line (cumulative) hit a new high with the new high in equities on Mar 2. This reduces the risk of a substantial decline. SeattleTechnicalAdvisors.com Page 1
Sentiment AAII Sentiment Survey Last month, equity allocations within individual investors' portfolios rebounded back to their second-highest level since the financial crisis. The February Asset Allocation Survey showed a rise in stock and stock fund holdings, a decline in fixed-income holdings and no change in cash allocations. Bullish sentiment fell 5.6 percentage points to 39.8% (top). The drop puts optimism at a four-week low. Bearish sentiment rose by 3.1 percentage points to 23.4%. The rise puts pessimism at a fourweek high. Rydex Bull Bear Ratio, the ratio of assets in Rydex bull funds vs. bear funds, rallied from 14.87 to the top of the 2015 consolidation at 17.85 last week. Gallup: As the bull market turns six and stocks recover from slippage in January, more U.S. investors say they are likely to ride out market volatility rather than sell off stocks. Nearly six in 10 say it's a good time to invest. Contrarian bearish! NAAIM Exposure Index, a weekly survey of active investment managers overall equity exposure pulled back from 99.23 to 92.15 last week (bottom). SeattleTechnicalAdvisors.com Page 2
Hybrid Lindsay Basic Cycle A small ascending middle section is found in June/July 2007. Point E is on 6/28/07. 1,404 days later is the high of the basic cycle on 5/2/11. Counting 1,404 days forward from the May high targets a low on March 6. Multiple Cycle The forecast is not complete without a confirming forecast from the multiple cycle. Point E of a descending middle section in the spring of 2000 counts 2,704 days to the high of the multiple cycle on 10/11/07. 2,704 days later is Saturday, March 7. 222 Lindsay s 222-day interval (221-224) targets a change in trend Mar 6-9. Cycles Short-term cycles point to a low on Mar 6. Mirror Image A low today (Mar 9) would create a mirror image count of 73 days from the low on Oct 15 and the high on Dec 26. I ve learned not to trust these patterns when they aren t centered on the highest high (as this one isn t) but not trusting them doesn t mean they don t work once in a while. Future hybrid forecasts call for a high near Mar 23 a low near Mar 30 and a high near Apr 15 SeattleTechnicalAdvisors.com Page 3
US Equities Equities were down last week; SPX -1.58%, Dow -1.52%, NASDAQ -0.73%, and RUT -1.29%. BWI turned up in confirmation of the decline and 3-day RSI is below 20; bearish. SPX closed at 2,071 and above next support at 2,064 (now that 2,093 has been breached). The fact that the 50-dma converges with this level should make this support level more dependable than normal. A break of 2,064 targets 2,000. The detrended oscillator is oversold warning of a bounce today or tomorrow. Cycles (short-term) call for a low near last Friday. Weekly and monthly cycle lows are due in March which may mark this week s low or the hybrid low expected near Mar 30. A 35wk cycle high is due in May confirming the three peaks/domed house forecast. Coppock Curves: Daily, weekly and monthly are all declining; very bearish. Seasonality (since 1943) March (in pre-election years) experiences the normal ups and downs of the market until the second half when it rallies strongly. SeattleTechnicalAdvisors.com Page 4
Europe EuroStoxx 50 rallied to a new high again last week gaining 0.81% to close at 3,619 and very close to making wave five equal to wave one. BWI confirms the rally. Price target: 3,682. The Coppock is not confirming the new highs. The index has not been this extended from its 200-dma since Jan 2013. First support should be the 21-dma at 3,496 followed by 3,414. Cycles point to a high now and a low in mid-march. Coppock Curves: Daily has stopped rising, the weekly is overbought; the monthly may be turning up. Seasonality shows a big drop in early March but the index finishes the month higher than where it began. German DAX-30 gained 1.51% to close at a new high, 11,556. BWI confirms the rally. The Coppock is not confirming the new high. A bullish head-and-shoulders pattern measures a minimum move to 11,700. Coppock Curves: Daily is rising, the weekly is rising but overbought, the monthly may be turning up. SeattleTechnicalAdvisors.com Page 5
Japan Bull Market NKX225 gained 0.92% last week and closed at 18,971 a new high in the bull market and very close to the triangle s minimum measured move to 19,000; confirmed buy-mode (buy the dips). The index has stretched beyond its 200-dma to the same extent seen at previous highs and the Coppock is high enough to look for a top now. Relative strength (vs. MSCI World) has not broken out to new highs; bearish. Long-term target: 24,000. Coppock Curves: Daily is rising but the weekly is in decline. The monthly is turning up; mixed messages. Seasonality shows a big drop in early March but finishes the month higher than where it began. TOPIX Banks: relative strength has broken its 2014 declining trendline; bullish the broad market. The bank index (absolute price) is at its highest level since 2008 (bottom). Small Caps reached the top of its trend channel on Friday even as relative performance (vs. NKX) is breaking down. SeattleTechnicalAdvisors.com Page 6
Emerging Markets MSCI Emerging Markets (EEM) lost 3.63% to close at 39.26 after the previous Friday s shooting star candlestick. Resistance at the Jan high near 41.00 proved insurmountable and EEM breached the Dec trendline on Friday. BWI confirms the decline. A bear flag measures a minimum decline to 35.00. Relative performance is still in a bear trend; bearish. The 200-dma is at 42.15 and has provided support and resistance throughout 2014. Look for support at 39.00. Cycles call for a short decline into early/mid-march. Longer term, cycles point to an important high in June. Coppock Curves: Daily has turned down but the weekly is rising and the monthly is falling; mixed messages. Shanghai Composite (SSEC) lost 2.09% last week to close at 3,241 and print an engulfing bearish candlestick on the weekly chart. The index has been moving sideways for all of 2015. Wait for a breakout above the January highs and 61.8% retracement of the 2007-08 bear market at 3,385 before getting long as SSEC has not fulfilled the downside measuring objective of the bearish wedge at 2,935. Coppock Curves: Daily is rising but the weekly is overbought and falling. Monthly is rising. SeattleTechnicalAdvisors.com Page 7
US Treasuries, TNX TNX gained 11.89% last week to close at 22.40 as it continues to push toward the 6mo cycle high due in mid-march. TNX broke through resistance at 21.45 (Feb high) on Friday and printed an engulfing bullish candlestick. Friday was a convergence of 13 and 21-day cycle highs so we could see TNX turn down today. A possible bullish head-and-shoulders pattern points to a minimum target near 26.00 however TNX should find resistance at the top of the trend channel near 24.00. The daily Coppock reached a good overbought extreme in Feb implying more upside but it is doubtful that the Coppock will confirm the next high setting up a decline into the cycle low in April. Cycles: A six-month cycle forecasts a high in mid/late March followed by a decline into mid- April. Look for another high in late May with equities. Coppock Curves: Daily has stopped declining and the weekly is rising. The monthly is still falling. Seasonality: TNX typically closes March well below where it began the month. SeattleTechnicalAdvisors.com Page 8
US Dollar Bull Market DXY gained 2.40% last week to close at 97.60 and printed a doji-star candlestick on Friday (bearish). BWI confirms the break out from the nearly twomonth sideways consolidation but, so far, neither 14-day RSI nor the Coppock are confirming the new high. The detrended oscillator is overbought warning of a pullback today or tomorrow. Once the top is printed, DXY should turn down into a 40wk cycle low due in Sept. The decline is likely to be interrupted by a bounce during April-June. The Sept. low should be followed by a rally into year-end when a 3yr cycle high matches a 4yr cycle low in gold. The breakout from the symmetrical triangle on the monthly chart measures an eventual minimum move to 102 which is the 61.8% retracement of the 2002 bear market (bottom). Coppock Curves: Daily, weekly and monthly are all rising; very bullish but high enough to look or a top. Seasonality: Early-year strength sees a peak in March followed by a decline until early May. SeattleTechnicalAdvisors.com Page 9
Euro Bear Market Euro lost 3.00% to close at 1.0859 last week breaking important support at 1.11. BWI turned up to confirm the decline. The detrended oscillator is oversold warning of a bounce today or tomorrow. The Coppock is not confirming the new low. The 61.8% retracement of the 2000 bull market has been breached opening up the possibility for a return to the 2000 low near 0.85. The break of the descending triangle in Dec forecasts a minimum decline to 0.87. Cycles forecast a high this autumn very close to expected turns in DXY and commodities. Coppock Curves: Daily, weekly and monthly are all in decline; very bearish. Seasonality points to an early month sell-off followed by a rally and finally a drop to new lows by the end of the month. SeattleTechnicalAdvisors.com Page 10
Japanese Yen Bear Market JY lost 0.81% last week to close at 82.86 and still below the 30-dma at 84.19. The Yen has been moving sideways since December. A close above 86.00 will be considered a bullish breakout. Important support is at the Dec. low at 82.00. An 8-yr cycle low appears to have marked the Dec low in the Yen. However, five waves down imply that the larger trend is also down. For now, expect a multi-month upward correction. Long-term, expect a minimum decline for the Yen to 66.00; the next important low is not due until springtime 2016. Coppock Curves; Daily ticked down last week but the weekly is rising. The monthly is falling but is setting up a positive divergence as it refuses to confirm the end of year new low. Seasonality shows big volatility early in March but finishes the month well below where it began. SeattleTechnicalAdvisors.com Page 11
Commodities S&P GS Commodity Index SPGSCI gave up 2.45% last week closing at 411.77 a victim of the stronger dollar. The rally in commodities, expected to begin near the end of last year, is clearly here but has been consolidating its gains since mid-february. The rally is expected to last until this fall as a response to the big decline since last June. The good overbought level reached by the Coppock in Feb forecasts a rally to higher highs before the bear market rally is complete (top). The weekly Coppock is oversold and rising. This should provide the impetus for a respectable rally in the bear market. Look for a minimum advance to the 38.2% retracement of the 2014 bear market near 490. Coppock Curves: Daily is falling. The weekly is rising but the monthly is still in decline. SeattleTechnicalAdvisors.com Page 12
Crude Oil Bear Market Rally Crude gave up $0.15/bbl. last week and closed at $49.61. Crude continues its consolidation since early February but remains above its 34-dma. With 14-day RSI having dipped below its own 20-dma but no break to the downside by crude this is looking like a re-loading for a move to new highs. A breakout from resistance at 54.11 will trigger a small bull flag which measures a minimum move to 65.00. A drop below 48.25 will disqualify the flag. The recent high in the daily Coppock indicates the initiation of a new uptrend ( good overbought ). Price target is the minimum expected 38.2% retracement at $68/bbl. However, the weekly Coppock confirmed the Jan low. Given the bad oversold nature of its decline we should expect a test of current lows (at a minimum) after any upside correction. Cycles call for a low in the first half of March. A 40wk cycle calls for a change in trend this week. Coppock Curves: Daily is falling. The weekly is rising but the monthly is still in decline. Seasonality: March is normally very bullish. The rig count dropped almost 6% last week. It was the 2nd biggest drop since 1993. If the decline is a response to price then it should be self-correcting. If, however, it is a response to demand, it is another sign of deflation. SeattleTechnicalAdvisors.com Page 13
Gold Bear Market Rally Gold lost $48.50/oz. closing at $1,164.10 and printed an engulfing bearish candlestick on the weekly chart. The break of the pivotal Feb low opens the door for a return to the Nov low near 1,302. The detrended oscillator is oversold warning of a bounce today or tomorrow. The break of the 61.8% retracement of the Nov rally opens the door for a return to those lows near 1,302. Cycles called for a high last week. March should be a down month with the low not seen until the end of Mar or mid-apr. Look for new highs in the May-July time period when weekly and monthly cycles converge on a top then (best guess: early-mid June). 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. Coppock Curves: Daily turned down on Friday and the weekly has rolled over. The monthly is starting to roll over; very bearish. Seasonality: Gold falls to a low in mid-march followed by a rally and a test of the low at months end. SeattleTechnicalAdvisors.com Page 14