Market Update

Usually on Wednesday mornings we do a standard ETF update.  But given the interesting things happening across several markets, this morning I thought I’d do a freer flowing update.

It appears that a long-awaited US dollar correction and commodity bounce may be starting.  Although it would be expected to be a counter trend rally (correction in USD), and to eventually make a test near the lows for commodities if it is to be a rally worth trading.  Don’t chase items that go vertical off the bottom, wait for pullbacks on items that become over bought off their bottoms if you want to be a commodity bull.  This could be a multi-week process.

In stocks, the US markets continued their bounce as expected.  Also gold stocks have taken on an ‘anti’ stance, along with the Biotechs of all things, and USD.

Today’s charts are very simple, with brief thoughts included.  We’ll start with the S&P 500 and HUI comparative over daily and monthly time frames.

S&P 500 is at a shorting zone (for those who would short) between 2050 and 2060.  Above 2065 is where the bulls start to take the advantage (pending in-day whipsaws above the parameter, as happened to the bears when SPX pierced the January low and reversed).

spx

HUI is consolidating its first leg up in a still-constructive looking pattern.  The measured target was 210 however, so we continue not to discount the possibility of a hit of the 180 support zone prior to a try for the next upside target of 224.

hui

The monthly charts are interesting for the 2 items above.  SPX is triggered down by MACD and taking on a similar look to the 1999-2000 and 2007-2008 processes.  If it does resolve bearish, 1900 (and a higher high to October) looks like a reasonable target area.  Beyond the near-term, the MACD has bull ending potential.

spx.mo

A subscriber sent me some analysis yesterday that showed gold’s monthly MACD crossed up and advising to buy gold and ignore the interim noise.  That is what a monthly chart does, it cancels the shorter-term noise.

HUI’s MACD does indeed indicate something better than has been seen in the bear market post-2011 and it is interesting that it is contrary the SPX’s configuration above.  Remember though, this looks good and bullish from a risk vs. reward standpoint, but if you are going to ‘set it and forget it’ you have to be ready for the interim moves that are much noisier, and not let them bother you.

hui.mo

Support for the CRB index is 220 and resistance is 228.50.  A nice bounce so far, but an extended rally is not indicated until it gets above the declining SMA 50.  IMO it is best to let it grind over the coming weeks and see if it can make an intermediate bottom.  Commodities remain in a bear market.

crb

Crude Oil has bounced hard.  It should either exceed the MA 50 and successfully grind and fight to hold it or decline to test the 48 area.  I would not advise chasing it until it does one of these things.

wtic

Here are a few of the outlier commodity funds, bouncing a bit but still in down trends.

lit

remx

ura

HEDJ (Europe currency hedged) vs. EZU (unhedged) show the point I was trying to make in a recent NFTRH about buying unhedged funds or stocks IF expecting a native currency rally.  i.e. HEDJ should under perform the unhedged EZU if the Euro continues to bounce (as would be expected if the USD continues to correct).

Alternatively, anyone wanting to try to trade Europe’s QE operation might start out in EZU and then switch to HEDJ later, when a USD correction looks to be maturing.  Just throwing out ideas, not suggestions.

hedj

ezu

Here is the weekly view of the Euro 50 vs. the S&P 500.  The noted support down to 1.60 is the tolerance on a ‘Europe outperforms US’ stance.

stox.spx

I’d expect the USD to eventually make it to near the SMA 50 to satisfy its over bought condition.  Isn’t it interesting that USD, gold and the miners corrected together while the broad markets and commodities went up?  Risk ‘off’ vs. risk ‘on’.  This reflects positively on our view that gold stock investors need not fear USD strength.  Currently, they need fear a risk ‘on’ mentality.

usd

Finally, in light of the USD getting dinged, we review a few global items.

The EM’s got back above the MA 50 and would be expected to find more relief if the USD continues to struggle in the near-term.  I was whipsawed in the EM’s.

eem

The China 25 found support at the MA 50.  I held TDF.

fxt

China 25 vs. S&P 500 by weekly chart looks constructive with positive MACD and a potential bottoming pattern.  Taking out the recent high sets it in motion for higher levels.

fxt.spx

There is growing interest in the subscriber base about India, and why not?  The country is well managed by its Central Bank and its demographics are superior to much of the emerging world.  I still believe valuations are an issue, but those bullish on India have just seen INDA touch support, which was noted previously in the last ETF update.

inda

Let’s look at Russia, which would be expected to recover to a degree if crude oil does more than just bounce quickly.  With a PE in the 3’s to 5’s (unverified) for its stock market, the value of a contrary play could emerge.  RSX should get and hold above the MA 50 to begin to prove something.

rsx

Finally for stock markets, Africa is one of the frontiers I keep an eye on for the loooong-term.  I found this pop above the MA 50 yesterday very interesting.  I’ll try to remember to add it to the standard ETF updates.

afk

As for bonds, we have been anticipating a correction in over bought, over loved Treasury bonds and that appears to be happening.  Junk bonds are bouncing vs. T bonds but still in a downtrend, implying risk ‘off’ is still dominant beyond the short-term.  But we also noted that the nominal Junk bond fund HYG has looked sneaky bullish lately.  Yesterday it got more so in the lurch to risk ‘on’ by casino patrons.

tlt

Bottom Line

We continue to call the US market on a bounce within a potential new bear phase until it breaks upside parameters noted in a regular update and an NFTRH+ update yesterday.  For general reference, that would be a hold above SPX 2065.  What is actually happening is that the ‘swing’ market is still doing its thing, alternatively eating up bulls and bears.  Out of this ‘swing’ phase, a new or resumed trend is going to eventually emerge.

We should also watch the Banks (not shown above, but at critical bull market support), given the view that interest rates can rise.  Banks would like rising yields out along the curve.  Also, Biotech is still in an unbroken uptrend.  We’ll also keep an eye on the Semiconductors, in the event they resume leadership.

Gold stocks continue to look constructive on the big picture and have not broken down on the short-term picture, though we continue to note 180 as key support.

Commodities have finally bounced as the USD got dinged.  Let’s watch the progress patiently.

Certain global areas continue to look better than the broad US market.  But this too is a process and needs to be gauged along the way.

This was meant to be a fairly brief update and I could go on with 10,000 more words.  Instead, we’ll clip it here and call the above simply a snapshot of markets with some thoughts thrown in.  We’ll review as usual in the weekend report.