Sunday, January 2, 2011

WMA 2 January 2011 – A brand new year...

This is the first market analysis of 2011. I had taken a hiatus for the last two months of November due to various reasons and it is time to break the lull. This year’s analysis will feature the implementation of our customized system that is based on customized indicators that I am using.

I wrote something on my TIP chart a couple of weeks ago to remind me of something… today is 1st January 2011 and I saw the message that I had left for myself. Indeed, it had happened. TIP weekly did not break the weekly TDST support (red dotted line), and the daily registered a higher low. As well as ALL the indicators that I am tracking ARE showing that it is about time for another rally. The last 3 days of 2010 also had very bullish candlestick patterns and my System 3B gave a buy signal at about the current price levels.
Expect that TIP will begin 2011 in a rally.

The last time I scribbled something on the chart, I wrote “JNK has a HL and indicators are suggesting another rally”. It did so, and then in the last week of 2010, there was a huge gap down below immediate support. The weekly TDST support is about 39, and may well be hit, but the true immediate trend is not clear at the moment.

Copper prices rallied really hard in the weeks of 2010, only to complete the Setup and Countdown. Weekly and Daily Stochastics are near the extreme top rising with low volumes, although the open interest has not yet waned. Although on the daily chart, copper prices should push the extreme a little further, a major pullback is in the cards for copper from extreme price levels.

Based on Napier’s leading indicators, January appears to start off bullish for a couple of days, and then turn bear. Thereafter, it would take TIP as a far leading indicator to rally enough with corporate bonds and copper to follow suit for a sustained rally through 2011. A nagging retracement is needed and should be in force mid-January through February 2011. 

The weekly SPY/SPX chart signals a continuation of the bullishness, but the daily is showing a bearish divergence about to manifest with extreme levels attained on low volumes. The extreme levels broke out of trendlines and are likely to fail just to test the lower supports.

The monthly SPY chart that the long term (years) outlook is bullish and 2011 should be bullish as well as the next 3 years or so. 2010 ended with a bullish entry signal (in September and October) and a follow through. The S&P500 should nto close below 1150 in a retractment. The indicators are just about signaling a bullish trend confirmation which suggests that 2011 should be bullish as well. However, it seems that by May 2011, a good and proper retracement is likely to occur. The previously mentioned January/February retracement is expected to be shallower compared to the expected May 2011 retracement. From the indicators, it appears that a period during 2004 may resemble the current chart pattern, and the coming months would confirm if the S&P500 would be in a multi-year uptrend.

The USD futures weekly chart show an interesting outlook. The current Setup has one more week to completion, and it is unusual to cancel at this stage usually. The last week of 2010 saw the USD sell off in a steep fashion, just barely keeping the Setup intact, as well as closing at the COP. According to the rules, the USD has to exceed the last high (make a higher high), and if it does break over 81, the next resistance is the TDST at 83.25. Failing to break both these resistance by January 2011, the USD should resume its primary trend down.
The daily chart shows some weakness in the USD accompanied by weak volumes and dropping open interest. While there appears to be a bearish bias on the 2011 opening of the USD, it is probable that the USD may rally again from mid-January 2011.
Using UUP to look at the USD monthly chart, it does not look too exciting for now. There appears to be more downside for the USD in the longer run into 2011, likely to about May 2011 at least.

The Euro ETF, FXE, is looking bullish from the monthly to the weekly to the daily perspective. This should add some down pressure on the USD as 2011 begins. Our system has given recent Buy entries on the weekly and daily FXE but personally, it looks deceiving. Something is not clear about the Euro despite the recent rally. Gut feel is that the Euro should be weak and then much stronger later this year.

Out of interest, looking at the USD/SGD weekly and daily chart, the SGD is continuing and will continue to gain strength against the USD.

Gold on a weekly and daily basis looks weak. The rallies are slowing and appear to fizzle out with weakening technicals. The monthly chart is VERY bullish, but appears to have reached a possible turning point, closing the year with a completed and perfected Setup. Although this does not signal a definitive turn, the short term technicals indicate very weak conditions.

Soft commodities – RJI & DBA
The RJI index is absolutely bullish weekly and daily, although the daily is waning in strength.

Similarly, DBA is looking good as well.

The only concern appearing is an almost parabolic rise in recent weeks that could end in retracement in February 2011.

The MadScientist - 2 January 2010

Note: Any material posted here is of my sole opinion, and my opinion may differ from others. It is definitely NOT a solicitation to do anything else as a consequence of reading this material. The material presented here is intended for educational purposes only.

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