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Gary Tanashian is proprietor of and Actionable, hype-free technical, macro economic and sentiment analysis is provided in the premium market report 'Notes From the Rabbit Hole' ( Complimentary analysis and commentary is available at the... More
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  • US Stock Market; Weekly Charts

    With the help of some of NFTRH's standard weekly charts, we take a snapshot of the US stock market.

    The Bank index is unbroken from a weekly perspective. People will talk about an H&S but it is not activated until the trend channel and the neckline (a well defined support area) are broken. BKX, along with the Semiconductors has been a notable leader to the entire surprise* phase of the bull market out of Q4, 2012.

    (click to enlarge)

    A breakdown of support would break this cycle of the bull market (if this is a secular bull market as many experts think, then the bull would live again after the cycle completes). It would probably be healthiest to the secular bull case for a breakdown to occur into a relatively small cyclical bear market.

    An alternative is that this summer correction proves to be the mini variety, serving to refuel for a final and manic launch to new highs (S&P 500 measurement is after all, 2192) that would ironically put a lie to Team Secular Bull after it ultimately flames out.

    * Surprised? Well, I came to be surprised (since moderated) by the longevity and intensity of this bull phase but our analysis was among the distinct minority leaning bullish in Q4 2012 due to the unsustainable hype of the Fiscal Cliff drama and the waning hype of the acute phase of the Euro Crisis. Then in Q1 of 2013 came macro fundamental news (provided for NFTRH subscribers in real time) out of the Semiconductor equipment sector, an up-turned Palladium-Gold ratio and down the road improving ISM, 'jobs', etc. Surprised? Nah.

    The Semiconductor index has dropped to a logical support area but the important - as in for all the marbles for Team Secular Bull - is the big picture breakout point at 560. It cannot be stressed strongly enough how critical that support would be to determining what this bull market is (or was).

    (click to enlarge)

    NDX is on a routine drop to test the first support area after yellow shaded correction #2 proved just as bullish as #1.

    (click to enlarge)

    A momentum leader, the Russell 2000 continues to look poor, with an ugly double top forming. As noted previously, a logical point to take bear positioning is at or around 1150.

    (click to enlarge)

    The Dow is getting interesting because it is at support critical to its Ascending Triangle and our long-standing operating target of 17,500. If it breaks down from here it does not mean 17,500 will not be achieved one day, but it does mean that it would not have done it off of this Triangle, which would be neutered before its measurement was achieved.

    (click to enlarge)

    S&P 500′s weekly chart matches up well with the daily we reviewed the other day. While SPX has not (yet) bounced to the degree I had hoped in order to re-short, the important support zones of the daily and the weekly match up nicely. A drop below the noted support would break the bull cycle. But a drop to that zone could prove a buying opportunity. Don't you love the markets? Parameters parameters everywhere, and not a definitive answer among them.

    (click to enlarge)

    We'll wrap it up with a look at the post-Q4 2012 leaders, the BKX-SPX and SOX-SPX ratios.

    (click to enlarge)

    Banks vs. the S&P 500 is still wobbly and below resistance. This ratio led the recent decline in the stock market.

    (click to enlarge)

    SOX-SPX ratio is well within its post-Q4 2012 channel as well as its more pronounced channel out of 2013. In other words, the Semi's leadership is a-okay.

    Bottom Line

    We fully anticipated a summer correction and thus far that is all it has been; and it's been a mild one (so far) at that. But what the markets do from here on out will refine probabilities as to these options…

    Option 1: A shallow correction here, could be a prelude to strongly renewed speculative vigor, culminating in a terminal bull market blow off. Ironically, Team Secular Bull would look heroic for a while and yet, this is not the scenario true secular bull adherents would want to see. A healthy market would need a real bearish clean out and even a moderate cyclical bear.

    Option 2: The current correction bites deeper, testing the cyclical bull market's limits but ultimately holds (using SPX 1860′s as a general reference point).

    Option 3: Of course, such a test of limits implies a decision point, and if the decision is that support would fail, then the cyclical bull may have already ended as I write this.

    That does not invalidate the prospect that we are in a new secular bull market, but personally I find the 'secular vs. cyclical' discussion useless because I for one do not ride cyclical bear markets down in anything resembling a 'stocks for the long run' brain wash.

    You'll notice I did not make even a passing mention of policy makers and their influence upon markets. That is because TA is TA and macro fundamental bitching and moaning is what it is. The above is the weekly TA picture on US markets, on the straight and narrow. | Notes From the Rabbit Hole | Free eLetter | Twitter

    Subscribe to NFTRH Premium for your 25-35 page weekly report, interim updates (including Key ETF charts) and NFTRH+ chart/trade ideas!

    Aug 07 9:00 AM | Link | Comment!
  • Semiconductor Sector's Excitement Continues

    Dialing back to January of 2013, I am looking for clues about the coming phase for the economy, mostly as an input into whether or not I can think about turning bullish on gold again (here we remind you again of gold's best investment case, which is counter not pro cyclical).

    The answer, from a contact in the Semiconductor sector (AMAT, LRCX, MKSI, etc.) food chain was that the Semi equipment companies, which we called "canaries on the [economic] coal mine", were ramping up and thus NFTRH's view became bullish for the economy, at least short-term.

    When this information was combined with the following chart of the Palladium-Gold ratio, which had proven a good economic backdrop indicator, the case for a firm economic phase was even stronger. Then followed a string of strong ISM data, a stabilizing 'jobs' picture and voila, here we are in Bull Party Central with trend followers everywhere looking good and touting to cement their reputations. But I digress…

    (click to enlarge)

    Here is the monthly view of PALL-Gold showing that the economy may not be done yet, although the break above resistance (now support) is still very tentative…

    (click to enlarge)

    We then began to manage the SOX index (note the eery similarity to PALL-Gold) and its 10 year resistance. This chart was created before the big breakout through resistance and the goofy target was noted as conservative, based strictly on a then would-be breakout and its theoretical measurement. Well now 'would-be' is and resistance is turned to support at around 560.

    (click to enlarge)

    This led to a search for Semiconductor companies in which to invest. Don't get caught up in the hype; many of these companies produce commoditized chips and devices. But now that the Wall Street hype machine is turning to the Semi sector, oh about 1.5 years after we did, a rising tide is lifting all boats that can boast the word "semiconductor" in the their name or product line.

    I locked onto Intel due first and foremost to the compelling technical situation (at former 14 year resistance, now massive support) and also the PC chip dinosaur's entry into the mobile chip market.

    (click to enlarge)

    The result was a rewarding investment for me personally, and for NFTRH+ (a free component of the overall NFTRH service) as its best stock highlight thus far.

    Another '+' highlight was Lattice Semiconductor (NASDAQ:LSCC), which is much more than a maker of commoditized chips, as its FPGA's have been selected by Google to power its Project Ara modular smart phone prototypes due to their "size, power and performance" qualities. The company is already richly valued and initiatives like this are what put the premium on top, along with good quarterly financial performance to date.

    I jumped the gun on NFTRH+'s conservative buy target near 7 (buying at around 8) because of this compelling big picture view. A loss was taken pending a personal decision on what to do either before or after earnings are reported, with the reporting date T minus 1 at July 24.

    (click to enlarge)

    Will the earnings report drive LSCC down to support and a potentially compelling buy or will it drive it up on a drive to the measured target of 13, never to be seen down here again? All I can tell you is that if LSCC ever sees the low 7′s and if it holds that support, the measured target would call for a near double in the stock price one day, going strictly by the chart. At the Q1 report management guided 'flat'.

    Here is what another (non-commodity) chip maker - with Apple as its daddy as opposed to Google - has done of late…

    (click to enlarge)

    The bottom line to all of this is that the Semi's have finally gotten in gear, which makes sense since we are on a maturing economic up phase with words and phrases like "mobile", "wearables" and "internet of things" getting the Wall Street tout that "additive manufacturing" AKA 3D Printing', got last year.

    Coming back to the SOX, another monthly view we have had going for many months…

    (click to enlarge)

    This is the one I call the 'Bollinger Band Creep' chart, which identified months ago, before the big picture breakout, the SOX' potential to do some representation of what it did in 1999. Well, it is still creeping up the top of the monthly Bollinger Bands for the first time since that epic blow off that came with a secular bull market termination cherry on top.

    SOX is our gateway to a market mania blow off. Watch it for signs of whether we will get a summer correction or a 'do not pass go, do not collect $200, go straight to manic (as in 'silver 2011′) market blow off'. ← Yes, I just had to get some macro into what was for me at least a buttoned down, fairly conventional post. :-) | Notes From the Rabbit Hole | Free eLetter | Twitter

    Subscribe to NFTRH Premium for your 25-35 page weekly report, interim updates (including Key ETF charts) and NFTRH+ chart/trade ideas!

    Disclosure: The author is long INTC.

    Jul 23 9:22 AM | Link | Comment!
  • Currencies And Gold, Big Picture

    We have not checked in on this motley crew at the public site in a long time (NFTRH keeps a running tab each week). Here are the monthly views of the basket cases we call major currencies.

    Uncle Buck and his reserve status were leveraged to the hilt by "The Hero" and now his successor is trying to gently talk the Fed out of its policy stance over time. In other words, tightening is going to come one way or another and Janet Yellen is trying to go the orderly route. When this process becomes disorderly, the USD is likely to benefit from the liquidations elsewhere in the asset world.

    Technically, USD is in a long basing pattern. There are those who think it is basing before a renewed decline, reading a Symmetrical Triangle (continuation) pattern into poor old Unc. I think the odds are it is bottoming over the post-2008 years when inflation - try as they might to have promoted it - simply has not taken root. Leaning bullish, watch support and resistance.

    (click to enlarge)

    Long ago we projected a rally in Uncle Buck's chief competitor, the Euro. This was due to a bottoming pattern (formed on shorter term charts) and unsustainable negative hype about the Euro crisis. The target was around 140 +/-, which is the top of the post-2008 downtrend channel. Euro remains in a big picture downtrend and if global asset markets start to come unwound in the coming months, it is not Euros people are going to run to, I can tell you that. Bearish below the upper trend line.

    (click to enlarge)

    Canada… oh Canada. For many months NFTRH has been noting the thick cap of resistance on the Canada dollar. For the last few it has been rising to test this resistance. On the big picture, the state of CDW (a 'commodity currency') is a bearish omen for commodities as long as it remains below resistance. There is a ton of hot air between the current level and any notable support. Inflationists better hope CDW negates resistance. Bearish.

    (click to enlarge)

    Fellow commodity currency the Aussie is also bearish as it dwells below a thick cap of resistance. As with Canada, get above resistance and we'll change our tune. But not until.

    (click to enlarge)

    The Swiss Franc seems to benefit in the run ups to global monetary crises owing to Switzerland's reputation as a sound money haven and sound economy. I am not sure if that reputation is as well founded as it once was, but the Swissy continues in a long-term uptrend channel (with a channel buster up in the Euro crisis). Going strictly by the chart, the XSF seems to be the best long-term bet of all the major currencies over the span of what we call the 'Age of Inflation onDemand' © (i.e. post-2000).

    (click to enlarge)

    But wait, there is another sound currency in circulation and it is called the Indian Rupee. This may not be considered a major currency, but it denominates a large emerging economy and most importantly, it is stewarded by a Central Banker (Raghuram Rajan) with the rarest of things, integrity. Lately Rajan has been open to easing his firm grip in the fight against inflation and he has been working with Modi. The result has been an India with a launching stock market and a still firm currency, which looks by the way, like a buy right here.

    (click to enlarge)

    Last but never least in 'confidence paper' sweepstakes, the Japanese Yen. The chart says what it needs to say regarding resistance and support. If global liquidity becomes constrained we'd look for Yen to rise to some degree along with the USD (both being anti-markets to varying degrees, with the rest of the asset world on the other side of the trade). If a continued asset market party is to be the play, expect the Yen to tank to support. Yen is neutral at the current level.

    (click to enlarge)

    Finally, the worst currency of them all… gold. Why this heavy metallic relic has proven useless to all those people who flooded into the supposed safe haven in refuge from the Euro crisis (a global knee jerk into gold). Various developed nations have been able to leverage their currencies to economic or at least stock market gains, after all. What has gold done? Why, it has just sat there retaining value and not only paying out nothing, but erasing the principle of the Knee Jerks and other assorted casino patrons who thought it was as easy as 'run to gold, be safe'.

    (click to enlarge)

    It doesn't work that way. When you are holding value (in this case monetary value) you are holding something that will lose assigned value when confidence in official policy making is high (it has been since 2012) and it will gain value when the angry mobs come after the policy hacks after the magic wears off (it will).

    Lecture aside, gold is trying to bottom here. The disasters that are the Middle East and Ukraine are not helping gold's case, don't fall for it. Just as the 2011 'Knee Jerks' hurt gold's investment sponsorship greatly on a large scale, the small scale panics can be damaging on a short-term basis.

    But if that is a bottoming pattern, we are on a count down to a time when the most boring currency of them all starts to slowly gain respect in the eyes of rational value seekers. | Notes From the Rabbit Hole | Free eLetter | Twitter

    Tags: UUP, FXE, FXY, FXA, FXC, FXF, GLD, Currencies, gold
    Jul 18 8:18 AM | Link | Comment!
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