Wednesday, February 15, 2012

The day after Valentines - February 15, 2012

It seems that when you rock the boat so hard, you tend to be balancing for your dear life quite a bit.
And that is what has been happening to me for the past 2 months or so... it's not been an easy task to balance the extremes of life's journey, but I am glad I am doing ok for now.

I am looking forward to more refinement and streamlining to make things less technical, and more accurate in 2012. This would be in line with the other parts of my career that I am pursing.
I am good at what I do... and I want to be better!

So, what has been happening since the beginning of the year? A nice rally is what it is, if you missed it. Which is kinda tough to do as the rally has turned the tables on last August's rout... or has it?

Again, I find myself available to look at the charts, just before a decisive action is about to take place...

ES futures (S&P500 E-mini futures)

From the chart below, the year started with an impressive rally, and it turned the bearish outlook around having tested and failed to bread the weekly 200MA. The current rally, however, looks tired and near exhaustion. Recent high probability daily sell signals were voided and technical indicators were not too excitable following the mania in the prices just now. Notice that that candles are grey in colour? I am waiting for an impending sell signal, which should appear some time next week, perhaps after an exhaustion spike later this week, if at all. The charts are telling me something: CAUTION.

DX futures (USD futures)

The USD futures are longer term bearish, but weekly prices have been well supported. The daily chart clearly sprung a buy signal, which is suggestive of lower equities in the near term. What I do not see is the news that would spark this USD rally... not yet at least. Perhaps the Greek deadline of 25th March might be it, or the mess leading to the muddle through on 25th March 2012 will contribute?

VXX (VIX futures ETF)

Volatility had been falling well for the past 1.5 months, and the cycle is about to reverse. The weekly charts are stalling and the daily chart has buy signals. It appears to be a ripe time for an increase in volatility, and if so, this warns of an exhausted ES rally into correction phase.

TLT (Bond ETF)

Money hasn't really been pouring into the bond market since late last year. Daily moving average supports have been tested and buy signals given. This suggests a possible start of a bond rally if supports hold.

GC (Gold futures)

The gold futures weekly chart is at a downtrending channel resistance, with less than favourable candlesticks over the last 3 weeks. Weekly indicators look weak, and the daily chart has given sell signals with accompanying bearishly looking technical indicators.

Overall, while the longer term picture does seem a tad bullish, the immediate term is suggesting a bearish/corrective outlook. How this correction develops and its fundamental reason for correcting may set the backdrop for months to come. I'd be slightly bearish and very cautious as it is obvious that there is compelling confluence between the equity-USD-volatility-Gold-bond markets, all which point to a turning point and a decent correction in equities.

The MadScientist

15 February 2012

Note: ALL material posted here is from my personal opinion, and my opinion may differ or change without notice. These do NOT constitute as solicitation, investment nor financial advice. By reading the materials presented here, Readers acknowledge the awareness that the materials are intended for educational purposes only. For investment(s) advice, related decisions and/or actions pertaining to investments, always consult your own qualified financial advisors, brokers, etc.

Charts are from TD Ameritrade Thinkorswim platform

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