Tuesday, July 28, 2009

In the begining of the correction?

Continuing with the post "DOW: Green Monday?", now I think a correction is very likely. Not necessarily tomorrow, because we need some confirmations, but the process is in development. We have some sell signals.

In the short term:

First, look at the UUP (BULL US Dollar index ETF). If we look at the moving averages that I use to track trend (when the 22 EMA cross the 100 SMA in the 15 minutes frequency chart, and is confirmed by the price, we have a signal), they are showing a change in trend. In addition, we can notice the bullish divergences. This does not mean that the indexes are going to fall from here, but they could begin to move sideways. This is not good for commodities and latin-american indexes.




Then, we have the BUY signal in the VIX. It is the same signal as the one in the UUP. Look that the charts, they are very similar.


This scenario is right, if we suppose that the markets are going to maintain the negative correlation with the dollar that they had until today.

Finally, if we look at the indexes, it is interesting to notice that we do not have a sell signal yet. Then, It is early to short the market (in my humble opinion). We need a confirmation in the SPY.


Gaining more perspective, here some daily charts:

SPY:



UUP:



QQQQ:


DOW JONES TRANSPORT:




Ticker sense: (bullish)

http://tickersense.typepad.com/.a/6a00d8341c924353ef0115723ba8d7970b-popup

In my opinion, we should look at the 950 level in the S & P 500. This is the key support.

Thursday, July 16, 2009

Some amazing coincidences

Looking some charts I have found some interesting coincidences that I would like to share.
First, look at the DJI monthly chart. In July, the 200 EMA cross the monthly 200 SMA. In addition, in the daily chart, we have the same resistance!. The 200 daily EMA.

DOW JONES Monthly Chart:



DOW JONES monthly chart with RSI, CMF, MACD & Stocastics:


Now looking at the 2002 bear market, we can see the same pattern. In my humble opinion, the reason of the recent movements of the market is shorts squeezes. And in the bottom of 2003, it looks like other short squeeze, to go down after.

DOW JONES 2002 bottom:



DOW JONES 2009 ......bottom?

Wednesday, July 15, 2009

S & P 500 & VIX

Today, there was something in the market that was very interesting to watch. The correlation between S & P 500 and the VIX. I had read some interesting articles that doubts on the possibility of making technical analysis on indexes like the VIX, but I consider this findings very useful.

Today, we could see the VIX rising as the S & p500. I try to look for the last time this happen, and finally I found something in August 2008.

In addition, the divergences in the ROC (Rate of change) are very similar as the structure of the movement in the S & P 500.

Here I attach the chart. I do not reach any conclusion yet. But, if we relate this with the definition of the VIX, it looks like the investors do not believe in this prices movements, and are paying higher prices to cover their risks in prices changes. The other possibility could be that the correlation between markets and VIX is changing.

VIX is the ticker symbol for the Chicago Board Options Exchange Volatility Index, a popular measure of the implied volatility of S&P 500 index options. A high value corresponds to a more volatile market and therefore more costly options, which can be used to defray risk from volatility.If investors see high risks of a change in prices, they will require a greater premium to insure against such a change by selling options. Often referred to as the fear index, it represents one measure of the market's expectation of volatility over the next 30 day period.

If you want to read more on the VIX, click here.


Related documents:

http://www.cboe.com/micro/vix/vixwhite.pdf

http://vixandmore.blogspot.com/2007/05/high-positive-correlation-between-vix.html

Monday, July 13, 2009

Updating some indexes

DOW JONES TRANSPORT:

DOW JONES INDUSTRIAL


DOW JONES US FINANCIAL INDEX:


SDS ETF (SPY SHORT)


DIA:

Sunday, July 12, 2009

DBC: watch-list

I find interesting to take a close look at what DBC is doing.

DBC seeks to reflect the performance of the Deutsche Bank Liquid Commodity index. The fund will pursue its investment objective by investing in a portfolio of exchange-traded futures on the commodities comprising the index, or the index commodities. The index commodities are light, sweet crude oil, heating oil, aluminum, gold, corn and wheat. The index is composed of notional amounts of each of the index commodities. The notional amounts of each index commodity are broadly in proportion to historical levels of the world’s production and supply.

Weekly chart:


Daily Chart:


Intraday chart:

DBC vs Gold and other commodities:


DBC vs Gold and other commodities:




Interesting related readings:

Embrace Deflation - It's The Cure, Not The Problem

Commodities' Blame Game

A New Moving Average System for ETF Portfolios

Hyperinflation or deflation

Bespoke's Commodity Snapshot (7/8/09)


.

Friday, July 10, 2009

DOW: green monday?

Today, the DOW closed with some interesting divergences.
First, on the intraday chart, we can see the divergence on the MACD and the RSI. In addition, the dynamical resistance had been broken:


On the daily chart, we can see the divergence in the RSI (parametrized at 7).


Finally, on the weekly chart, all the indicators remains in bearish situation:


Transports ($TRAN in stockcharts.com) is the sector that is supporting the rest of the indexes. It is showing an amazing strength. This is the sector to look closely and follow.

Finally, the SPY is still over the 200 SMA. During the last 3 days, it showed weakness to the downside. I think the reason is that the overall traders and blogs are expecting big moves downward. Then, Mr. Market enjoys making them loose their patience and doing the opposite.

Thursday, July 9, 2009

POT: watchlist

Here I found POT, which is moving in an upward channel. My doubt is on the last channel that had been forming during the past two weeks. It looks like a bear flag.....
Here I attach a summary on the activities of Potash. For an accurate research of the fundamentals, I suggest visit Wikinvest.

http://www.wikinvest.com/stock/Potash_Corporation_of_Saskatchewan_%28POT%29

The Potash Corporation of Saskatchewan (NYSE: POT) (TSE: POT) was the largest crop fertilizer company in the world in 2008 with $9.4 billion in sales.[1] In 2008, Potash Corporation was the world's largest potash producer and was also the world's the third largest producer of both nitrogen and phosphate.[2] These are the three primary crop nutrients essential for producing fertilizer. The company also controls the majority of the world's excess potash supply. By adjusting its production to match world demand, the company is able to maintain high prices. Also, the company benefits from operating in an industry with high barriers to entry. Potash Corporation estimates that a new entrant would have to spend at least $2.5B to get a new mine operational.

Here is the daily chart of POT. May be it is developing a H & S pattern. If this is the case, the 88 level is key.


Weekly Chart:


Daily Chart:
POT vs OIL, CRB index and S & P 500:

Wednesday, July 8, 2009

DJ USFN vs DJ USTRANS

Will the US transport index follow the US Financial Index?

DOW JONES US Financial Index:




DOW JONES US TRANSPORT index:

Today's close

This is one scenario we could consider for the indexes. We have a dozen, but this one is, in my opinion, the most likely, since it is in accordance with some elliot wave counts that I have seen in other blogs.
The range 880-885 is a key level. If, in the coming days, the S & P 500 closes over this level, we have to change the hypothesis. The head and shoulder would be invalid, and then, this range is a good number to put your stops in case you had gone short.

We can see the 200 DMA acting as a resistance (dotted yellow line), the 50 DMA broken support (dotted green line) and the Andrew's Pitchfork channels on both, DOW JONES and SPY.
It is worth note that in the SPY, the 200 DMA is supporting the downward pressure, while in the DOW JONES is playing as resistance.

DOW JONES:

SPY:

Tuesday, July 7, 2009

SPY: Medium Term Trendlines



DOW JONES: Today's close

The neckline had been broken today. We can expect a bounce for tomorrow until 8250 / 8300 for the DOW JONES. But it's is clear that the trend is down....

Monday, July 6, 2009

DBA: Watch-list


DBA is moving within a channel. If we want to go long, be aware on how you see the US dollar Index. I do not have a clear signal to go long or short in UUP. Here is the chart of the UUP (PB USD BULL ETF):



And here you can see the correlation between UUP and DBA. Notice that there is a period (from Dec. 23 2008 to Jan. 6 2009) in which both ETFs have positive correlation. The rest of the year the correlation had been negative.



DBA daily Chart:

DBA Weekly Chart:

Dow Jones: Weekly chart SELL Signals



Today's close

DOW JONES:

Watchlist: WRB

Because the market risk is very high, I am concentrating on low-beta shares (low correlation with the market). Among these, I found very interesting William R. Berkley (WRB).

W. R. Berkley Corporation (W. R. Berkley) is an insurance holding company. The Company operates in five segments of the property casualty insurance business: specialty, regional, alternative markets, reinsurance and international. The specialty segment underwrites complex and third-party liability risks, principally within excess and surplus lines, and includes specialty lines of insurance. The regional segment provides commercial property casualty insurance. The Company's alternative markets operations specialize in insuring, reinsuring and administering self-insurance programs and other alternative risk transfer mechanisms. Its reinsurance operations consist of seven operating units, which specialize in underwriting property casualty reinsurance on both a treaty and a facultative basis on behalf of Berkley Insurance Company. The international segment has operations in Australia, South America, the United Kingdom and Continental Europe.

Beta: 0.9
Dividend yield: $0.24 - 1.1% (very low)
Average volume (10 days): 1.9 m.

WRB reported 1st quarter 2009 earnings of $0.25 per share on April 27, 2009. This missed the $0.37 consensus expectations of the 13 analysts following the company.
The next earnings announcement from WRB is expected the week of July 27, 2009. $0.62 is expected by analysts.

Valuation Ratios:
Price/Earnings (TTM) 54.41x
Price/Sales (TTM) 0.8x
Price/Book (MRQ) 1.12x
Price/Cash Flow (TTM) 24.2x

WRB's debt to total capital ratio, at 29.22%, is in-line with the Insurance (Prop. & Casualty) industry's norm despite its increase over the last year.

This is basic information. You can look in many web pages to analyze the rest of the fundamentals.

Form 10-Q
Quarterly Report:


http://ir.wrberkley.com/secfiling.cfm?filingID=950123-09-8373

Daily Chart:




Weekly Chart:

Long Term WRB arithmetic chart and Fibonacci proportions:

Short Term Logarithmic chart and Fibonacci proportions:


NEWS: Negative for WRB.

http://seekingalpha.com/article/146950-state-budget-gaps-and-investment-implications

Stock Market Impact of the state budget gaps:

Banks have enough trouble without defaults on muni bonds on top, but that is a possibility to keep on the radar screen.

P&C insurance companies are perhaps more at risk. According to Morningstar, 40% of P&C insurance company assets are in muni bonds, and for Travelers (TRV), Chubb (CB), WR Berkely (WRB) and Mercury General (MCY), the holdings are 50% or more. Expectation of significant muni payment deferrals (sounds better than default) would have adverse stock price impact on P&C insurance companies.



Saturday, July 4, 2009

SDS: playing the short side

In line with the previous post, SDS (the ultrashort S & P 500 ETF) could be a good option to play the short side. If you want something less volatile, use the SH ETF.
We do not have a buy confirmed, but it is recommended to include it in your watch-list, because it looks like it will reverse the trend, in line with the global markets.

But remember, this ETFs, are not for the long term. They tend to zero in the long term.

Weekly Chart:



Daily chart:



SDS / SPY ratio:

 
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