WMA - 4 April 2010 - POP! goes the weasel...

TIPS
Weekly divergence correcting into a mild downtrend with strength getting weak. Daily downtrend underway with weakening signals and at lower end of the channel. Weakness observed in the rally.
JNK
Weekly divergence mildly corrected. Daily is in some sort of range squeeze with overbought signals in the STO. May be starting to crack…
DBB / /HG
Base metals is doing one hell of a stunt… The weekly divergence is just building up, having just about broken the back of the bull in the January 2010 correction. The daily tells me of overbought build up in an obvious divergence about to correct. There is an estimated 4-5 days of rallying legs for this.
Copper is now very bullish, having incompleted a divergent correction. Daily charts scream of mania for the rest of this week.

The above covers the three main leading indicators as outlined by Russell Napier. According to his indicators, we are in for a week of absolute bullishness, which is suggestive given the economic data, especially the NFP employment report out on Good Friday. Even Paul Krugman mentioned in is column in a very short post that the patient is in a stable condition.


/DX
The USD closed above 81 for the month of March, and the next day bounced a little further up to 81.44. This indicates a good rally in the USD, something which Napier also had commented about for 2010, contrary to many other analysts or writers. Hereon, the USD should be on a confirmed uptrend and have a corrective dip later. Hence, the charts are not signaling a USD bear rally. Clearly the relationship of the USD with the SPX (and gold) is under transition, but I would like to keep this under the radar scans as it ran out of Greece (pun intended), and is still moving along the uptrend.

SPX / S&P500
It is really interesting how the picture looks… the weekly STO show an overbought situation with the MACDH pointing to a huge divergence. While undeniable that the market is heading up, it is a maniac patient in the daily charts, which again are smacking me in the face with bearish divergences. Going into a very seasonally bullish April, this return to mean would be really interesting. Again, the charts tell me that this week would be rather bullish, and end-April onwards, may come the day that the music dies. This market is on Prozac, and watch of the withdrawal reactions!

/GC / Gold
Gold’s relationship with the USD is on the rocks and is in transition. While the USD rose, Gold did not fall as much. On the weekly charts, Gold looks somewhat bullish. The daily charts also scream of the birth of another small gold bull. Although I see bullishness, moving forward, I wonder if Gold is about to do another spectacular spike or just range. This bull I would be cautious for now.

/CL / Crude
Weekly charts show long term technical weakness with about two more weeks of exuberance. Daily charts are very bullish, and with a maniac spike up last Thursday, I wonder how and when this bearish divergence is going to play out. IF it is, I am expecting it to happen at the end of April, after the seasonal burn out and the realities of the markets come back.

VIX / VXX
This is a “special” of sorts… I remember that the VIX was in the news at the height of the 2008/2009 market tanker. Today, it seems forgotten by the news, and that’s where complacency sets in. Weekly VIX charts are showing signs of strength with a 3 year support at 16. The daily VIX are also in a squeeze and resolution should be set soon. Given the problems of the world economy right now, doesn’t seem like the VIX would drop to 11.5 as it did in the 2007 height of the markets. The VXX (VIX ETF) is also showing some interesting pictures in the weekly and daily charts. “How low can you go?”



From the above scan, markets will once again make phenomenal advances to achieve some sort of mania. Although expecting, I am also aware that I would be surprised by this exuberance. And I must restrain myself and be patient for the turning…