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CGTS UPDATE: RALLY ENDING? GET READY FOR MORE SHORT POSITIONS 4 comments
FOR MONDAY, 29 August 2011
Ben Bernanke speaks, says nothing, and stocks go up. Well, it wasn't really Ben. We were in the last leg of the current 'snap-back' rally expansion. Stocks wanted to go up, no matter what Ben said -- and, of course, Ben said nothing. Ben has become an international political liability. So he is now bound and gagged. His QE policies outraged foreign governments for exporting inflation to the entire world and generating revolution and unrest in many parts of the world (so much for another asset price bubble) and also outraged domestic conservatives. He is now being called a 'traitor' and being threatened with a public hanging by outraged Texans -- so he better cool the 'I'm going to save the world' hubris or he'll become an even heavier albatross around the neck of Obama.
Remember, Ben was George Bush's appointment -- Obama just kept him there, probably because of powerful suggestions from Golden Sachs executives and others.
Obama has to unload Bernanke -- who is making his presidency look like a version of "Wall Street Knows Best," -- a cliche television show from the Fifties -- something which will eventually lead to his demise in the eyes of disappointed democrats.
So, is the rally ending? I think it is. The charts I include with this posting show pretty clearly that the momentum is still negative long-term -- AND that the rally back from recent lows is just about spent. And a pretty weak rally it proved to be -- some very impressive up-days by also some very powerful down-days, tending to neutralize the overall move.
Lets look at BKX, the Banking Index -- American Banks. It is giving us a shortsell signal for Monday. Note the brown-line overlay in the top pane: this indicator [M2F Alt] is giving an 'implied top' reading. Note the other points in the chart where M2F Alt reached overbought levels, a decline generally followed. Also, a bull market is defined technically as higher-highs in prices AND higher lows. Look at the small-term trend (blue line) in the third pane down. This shows a continual and contuinuing period of lower lows and lower highs. The 'implied top' is implying another turning down of this indicator below resistance, which will be negative for banking stocks.
The Dow Jones Industrials chart also shows an implied trading top in the making. In fact, the decline started yesterday. The short-term trend indicator did not (so far) turn positive during this rally. It did try to turn up -- but there was not enough buying power to flip the switch back up. The implied top is suggesting the next move down will challenge support at 10719.94. If this floor breaks, then the Bear Market is still on. If it does not break, then we'll need a new top to confirm that an 'attempted' bottom has been put in. Next week should be a down week on the Dow.
How does France look? Not good. France's rally was feeble -- and its trend is clearly down more.
Germany? Even worse than France. Nothing to stop the DAX from making a new low.
How about the VIX, the Volatility Index? The VIX tends to rise as stocks sink. The VIX has made an implied bottom, and looks to be ready to make its next move up. The trend of higher highs and higher lows is still intact.
What are our CGTS trading readings telling us?
We have other charts to show, those stocks and ETFs showing up as signals under the "Close/Midpoint LT 8/11" trading system.
ACH, Aluminum Corp of China. Shortsell. Note the perfect pattern of T5 Short-Term Trend 'stepping down' in the third pane from the top, making lower lows and lower highs. This means no bottom yet.
ADBE, Adobe. Adobe is really tring to build a bottom here. It 'almost' put in a higher low; and it is threatening to break to a new high. I would probably not short ADBE because of this inherent strength -- however the implied top makes it likely ADBE will trend lower in the next week to 10 days.
Remember: the M2F Alt indicator 'implies' a top. But M2F Alt can remain overbought for a significant time IF the underlying trends are positive. The 'implied' top is much more likely to actually be a top when trends (pane 3 below) are negative, as they are in the case of ADBE.
CAT, Caterpillar. Everyone loves Caterpillar -- right? Well, not at the moment. Another leg down here pretty much guaranteed. The flat 'implied top' [M2F Alt, top pane, brown line] means it is trying to sustain this rally. But the buying power in this rally has been really insignificant. This looks like a sell rallies story, as do most of the stocks I'm showing you today.
GVA, Granite Concrete. Very negative picture especially because of the lack of an attempt to really bottom during this rally. The short-term trend picture (blue line, 3rd pane down) is very negative.
HON, Honeywell. Implied top; short-term trend making lower lows and lower highs. Shortsell. Although the note in the second pane is cut off -- the second pane indicator trends above zero and the BULL ZONE and below zero and the BEAR ZONE. When the long-term trend is negative, and the M4 Sum Plus indicator jumps above zero, this is a good time to look to buy the Bear Market rallies. This was the case in late June -- but now the indicator remains in the placid lower waters of the BEAR ZONE.
NOC, Northrup Grummon. I'm long September put options on NOC. I'm expecting lower prices here also.
OIL, Oil ETF. Oil has made a higher bottom; so it now must make a higher top to confirm a serious bottom attempt here. Will it? I think not. The 'implied top' has already begun to move lower with the prices. They key now for OIL will be holding above the old support level of 20.47.
XHB, Housing ETF. Dismal picture just keeps getting more and more dismal. The Housing Bubble just keeps on taking, and taking, and taking.... I hope we remember this the next time we're tempted to cheat the devil (2037). I'm long September puts on XHB. Nothing positive in this chart either.
HUI, Gold Stock Index. Gold stocks have had their sell-off. Note the implied bottom in the first pane. Note the presence in the BULL ZONE in the second pane down. Note the trends in pane 3 are making higher highs and higher lows. This is what a BULL PATTERN picture looks like.
IEF, 7-10 TBond ETF. If gold is still good, what about TBonds. All the news on Friday was negative. GDP is lower than expected. GDP in Germany this week was also lower. France is not growing. Greece is sinking. Stocks are teetering on the brink of collapse. TBonds pay almost nothing -- still they are, along with gold and the Swiss Franc and the Japanese Yen, they only safe havens left. TBonds had their selloff. Now they are ready to resume their rally.
DXD, Short Dow ETF. Has had its pullback; and it is making an 'implied bottom'. In fact, made the first leg up on Friday, despite the frantic Bernanke rally at the end of the trading day. If support at 19.16 breaks, then we might have a story. Otherwise, stocks lower; gold and TBonds higher
EEV, Short Europe ETF. Implied bottom put in yesterday. Next leg up has already begun.
QID, Short Nasdaq Index ETF. Seems to be saying that rally is over. Sell off in technology stocks (Nasdaq Index) should resume.
Good luck everyone on the East Coast with an angry Irene coming to visit. The first girl I loved was named Irene. I wouldn't want to see her mad. Well, this is a Night-Cycle. During the Night-Cycle, it's Nature against Man (and also Woman against Man), so be prepared for more suffering until about 2019.
More information on the CGTS systems can be found at:
home.mindspring.com/~mclark7/CGTS09.htm
MICHAEL J CLARK
Clark's Gate Timing System
Hanoi, Vietnam
cgts@mindspring.com
CGT
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This post has 4 comments:
Glad I caught your post. Any feel for rare earth metal stocks like AVL and QRM? I added them a couple of weeks ago when they got beaten down.
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StockTalks
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Apple wants to bottom; but IS Apple bottoming? Not so far. http://seekingalpha.com/p/zmvd
Mar 18, 2013
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Are global stocks topping? Probably not. All depends on what the US Dollar does. http://bit.ly/LfW9VY
Mar 15, 2013
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Words matter. Let's first agree to start calling INFLATION and ECONOMIC GROWTH the same thing. http://seekingalpha.com/p/zcd1
Mar 14, 2013
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