Friday, April 8, 2011
Daily Trends - Weekly Close Analysis
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This will be a new feature to this blog called the "Weekly Close Analysis". Here we will analyze the daily chart patterns of various trading instruments within Metatrader 4.0.
We will start off measuring volatility index also called the VIX. Some like to call this the "fear index" because it is believed to measure fear or risk. When the Vix is in a downtrend it is bullish (risk takers) and when it's in an uptrend it is bearish (fear). The VIX has what's called an inverse correlation to stocks. The Vix has been in a weak downtrend (bullish for stocks) closing below the 50 LWMA and or special indicator has been in a sell pattern. LWMA = Linear Weighted Moving Average.
Now that we see the Vix is in a downtrend we can see that the DJI30 (Dow Jones Index) is in an uptrend and my indicator has been screaming buy since 3/18/2011.
Q1 earnings season kicks off Monday. Nervous investors will be anxious to measure the impact on corporate results after Japan’s Earthquake and Nuclear Disaster from the 9.1 great quake. Most insurers in the property-casualty insurance sector are likely to post losses after New Zealand and Japan earthquakes as well as Australia floods. After Fridays close the government managed to stay open with Congressional leaders and the White House reached a late-hour deal. $38.5 billion will be cut from the original budget for the fiscal year that runs through September in what leaders called the biggest annual spending reduction in history but the spiraling out of control deficit could reach $1.5 trillion in 2011 alone. There was no market reaction because the markets are closed for the weekend.
Ironically Google has been trading in a bit of a down trend closing below the 50 LWMA. Google just recently agreed to antitrust deal on ITA.
Exxon Mobil pulled back above the 50 LWMA and my indicator has been screaming buy 3/17/2011. Q1 2011 Exxon Mobil Corp Earnings Conference Call Thursday, April 28, 2011.
The Hang Seng Index has been rapidly moving higher the entire trading week. Despite the optimism China has issued price controls to control inflation.
The Dax rebounding from a sharp fall. The ECB (European Central Bank) raised rates 25 basis points to 1.25% despite pleading from Portugal that they need a bailout. Germany the Euros largest member has been opposed to bailout of the smaller Euro-Zone members. Earlier in the weak German Industrial Production came in at 1.6% MOM (month over month) for FEB2011 which was much stronger than 0.5% expected. The YOY (year over year) reading was 14.8% and also much better than 13.2% that was expected indicates the German industrial economy was strong.
“We expect the growth rate to ease,” Chief Financial Officer Joe Kaeser. The company said earnings in the quarter that just ended were burdened by a “disappointing” renewable energy division. This quote was from Bloomberg News.
Siemens retraced down towards the daily 50 LWMA but still stayed above it. It did not look strong above the 50 LWMA.
UK stocks mimicked the DAX and had a strong rebound.
Candian stocks followed along as well.
Despite that large natural disaster that occurred the Japanese economy had been doing ok before the accident so was able to take back some of it's huge losses. It did however fail to close above it's 50 LWMA on the Daily Chart.
* now Corn, Wheat, Sugar Gold, Silver, Copper, Platinum among many others can be traded within Metatrader. Not all FOREX brokers have this but there are some that do.
Making record highs and on the front page of every newspaper. Gold has flirted with reversal but surging to new highs from US dollar weakness and lots of political turmoil. Imagine being a foreigner and reading the US government might have to shut down at the same time the US is at war with Afghanistan, Iraq (occupied), and Libya.
Crude oil as priced in USD has been carving out new highs and trading strongly above the psychological level of $100. This level has been mentioned in the past few years with weak dollar policy and the United States dependence on foreign controlled oil in many territories that are anti-US. The Egyptian and Libyan crisis have been key drivers of the push above $100.
Corn gaped higher on 3/18/2011 and has since been trending higher. The gap up from 629.25 never closed. Rising demand for corn for ethanol producers is pushing reserves in the US to the lowest point in 15 years. Corn reserves will fall to a projected 675 million bushels in late August, when the harvest begins. But be careful going long. In my experience when you see big headline news that's all over the wire that is extremely bullish or bearish it can often be a contrarian indicator.
Wheat decided to break above it's 50 LWMA and follow Corn higher. But unlike Corn, Wheat isn't carving out new highs so in that sense is counter trending higher. Because of higher prices some importers are growing more wheat.
Sugar went against the grain and went lower trading below it's 50 LWMA. Hurting demand was the worst ever earthquake to hit Japan and meltdown of it's nuclear facilities.
Behind the rising commodities prices was a very weak USDX. With the Euro going for a 2nd round of rate hikes the Federal Reserve Bank is still hold rates at near zero. As a consequence the US Dollar has been trading near record lows while the Australian dollar is making new record highs well above parity. At the same time Gold has made historical record levels. The USDX remains in a very strong downtrend. A reaction to the budget could reverse the downtrend but that is too early to say with the markets being closed at the time an agreement was made by US Politicians. The QE program will have to end soon and rates will have to be raised before there is any confidence in the dollar. This shouldn't stop smart investors from capitalizing by playing against the dollar while the USFED has the money creation pedal at full throttle. So be sure you hedge accordingly.
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- ▼ April (9)