Martin Pring s Weekly InfoMovie Report April 8, 2014 Issue 1093 Weekly InfoMovie Report 1
Key level remains $184 on the SPY. US Equity Market - Last time I pointed out that the $184 level on the S&P ETF (the SPY) and 16,200 for that of the Dow were fairly crucial ones from a short-term point of view. In the case of the SPY, that was because it intersected with the green breakout trendline. As you can see, the price has so far held at this support level. However, this up trendline has been violated. To make matters worse, the preceding rally was accompanied by declining volume, a bearish factor and these two declining days in contrast by very heavy activity; again a negative characteristic. This is completely the opposite of what we would expect for a healthy market. It makes me believe that this potential broadening formation with a flat top will be completed. Alternatively, a small rally and 2 Weekly InfoMovie Report
Support at previous low (1740) and 200- day MA (1755) Bearish and moderately overbought. subsequent break would turn the formation into a head and shoulders formation. Either way, a downside break that holds below $184 would signal lower prices. This chart says a break is likely because the KST is bearish and moderately overbought. Support lies at the previous low at 1740 and the 200-day MA at 1755. Weekly InfoMovie Report 3
Decisive trendline violation. T T Brokers are one of my favorite sectors because they have a strong tendency to lead the S&P. They have been acting in quiet support for the S&P in the last couple of years. However, they are now starting to give us a message and it s not a good one. First, they failed to confirm the most recent S&P high. Second, the price has decisively violated its 1-year up trendline. Finally, the RS line has violated its up trendline and completed a double top. Both KSTs are bearish, suggesting there is more downside to come. 4 Weekly InfoMovie Report
Whipsaw breakout Right at the trendline, the 200-day MA and previous low at 2.74. Bearish and not oversold. The ratio between the S&P ETF, the SPY and the rest of the world as represented by the MSCI Europe, Australia, Far East ETF (the EFA) recently experienced an upside breakout. As you can see, it turned into a whipsaw, so we will change the color of the trendline to a bearish red as whipsaws are often followed by above average moves. Now the ratio has fallen to the critical area where the trendline, previous low and 200-day MA are currently residing. That s at 2.74. I wouldn t be surprised at a small bounce favoring the US, in view of the recent steep decline. Nevertheless, the weak and far from oversold KST suggests that this support will eventually be violated. If so, that s likely to be very significant since the trendline goes all the way back to mid-2011, just prior to when the latest phase of the post 2009 bull market began. Weekly InfoMovie Report 5
Right at the 2011-2014 up trendline. Definitely declining. Hooking over. In the previous issue we looked at the ratio between the S&P and the Dow Jones UBS Commodity ETN, the SPY to the DJP. In the last few days it has moved to this 2011/14 up trendline, so virtually any additional downside will result in a decisive break. The KST is flattening, but the short-term composite is in a definite declining mode. Consequently, I am expecting a downside break favoring commodity prices over equities. If such a development does take place, it will be the first character change of this nature that has taken place since the second phase of the bull market in equities started in 2011. 6 Weekly InfoMovie Report
Both lines are intact. Short-term buy mode. Finally, I need to point out the precarious nature of the Japanese equity market as the Nikkei struggles to remain above this trendline as does its Special K above this one. Neither has yet been violated and the saving grace is the rising short-term KST. Nevertheless, unless the Nikkei recovers lost ground in fairly short order a major decline looks likely. Weekly InfoMovie Report 7
Mixed Credit Markets - The Barclays 20-year Trust, the TLT, recently broke out from this base but the break has so far turned out to be a false one. The last few days have seen an attempt at another breakout, but so far, with no success. The two momentum indicators are offering a mixed picture with a positive KST and falling RSI. It seems to me the direction of the next move will depend on whether the price can close above its recent high at $110, or if it slips below the previous lows and 200-day MA at $105.90. 8 Weekly InfoMovie Report
Lines are at 79 and 81. Bullish Currencies - The Dollar Index remains in its 79-81 trading range bound between the two trendlines. Both momentum series remain in a positive mode, but time is rapidly running out for an upside break above the green line and the 200-day MA as the oscillators work their way higher. Weekly InfoMovie Report 9
$133 is the level to beat. Still declining Turning up. Precious Metals - Last week we looked at the idea that gold was, by some measure, oversold at a time when it had reached support. That, I argued, should be enough to trigger a rally if gold is in a primary bull market. We still do not have a definitive answer to that question because the price of the yellow metal has not crossed above its 12-month MA. Nor has it started to trace out a series of rising peaks and troughs. What we need is a move that takes the price above these two converging trendlines; aka, its March high of $133 on the Gold Trust ETF, the GLD. The KST, though, is still declining, so we are not completely out of the woods. However, the more sensitive smoothed RSI has begun to rally. Hope springs eternal if you are a gold bull, but let s wait for the proof with a decisive daily close that can hold above $133. 10 Weekly InfoMovie Report
Support Commodities - You can sometimes get a clue as to the direction of the primary trend by the way a momentum indicator reacts. A primary bull market, for instance, is usually characterized by controlled and limited corrections. Here we see a breakout by the Dow Jones UBS Commodity ETN. The correction has so far been limited to the breakout point. Also, the 10-day net new high indicator usually leads the price oscillator in the center panel. Here we show a rare exception. Now the new high series looks as if it has led another bottom in the oscillator, all of which suggests that prices will be soon moving higher again. Weekly InfoMovie Report 11
In Summary: 1. US stock market starting to look vulnerable. Watch that $184 level on the SPY. 2. Gold looks like it is headed higher. 3. Commodities are probably set to continue their advance. 12 Weekly InfoMovie Report