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CGTS FOR MONDAY 9 AUGUST: Momentum Sags a Bit. Gold issues get ready to rocket higher.

CLARK'S GATE TIMING SYSTEM
  9 AUGUST 2010
- MONDAY

NEW TRADING POSITIONS:
BUY SIGNALS: None
SHORTSELL SIGNALS: None

A.  MARKET MOMENTUM

CGTS VIEW: Stocks fell sharply on Friday, and then spent the rest of the session clawing back toward zero.  Our Momentum indicators show a deterioration of upward momentum, with 165 issues we follow now having turned down most recently rather than turning up; 128 issues have turned up more recently than down.

The momentum trend is still quite positive, with 250 issues trading in bullish territory (0 to positive 1) and only 43 issues trading in bearish territory (0 to negative 1).  Issues dipping from 1 to 0 are giving what in effect is a trading sell signal -- not a shortsell signal -- issues dipping from 0 to -1 are giving what effectively is a short-sell signal.

223 issues are still positive in terms of intermediate-trend; 68 are in Int-term negative trends.  We added one issue to the negative column and subtracted one issue from the positive column today, a change of -2 for the day, not significant.

We also work with a long-term Momentum Indicator M5 3 Average.  We look at this indicator below under the Trading Section.  We have a list of issues that are what we call "CAUTION" issues -- they appear to be at or near trading tops.  They are not giving Sell Signals at this point; but they are overbought and turning down.  We have a list of issues giving "CAUTION".  We also give a list of issues giving "INTEREST" readings as ssues to keep an eye on long positions.  Gold issues dominate the INTEREST group.  VIX is there, as is UUP, the US Dollar Bullish ETF, and Inverse Stock Index ETFs.  There are a wide range of issues in the 'CAUTION" group, including Citicorp, American Express, 3M, the India and the Turkey Indexes.  See these lists below.

August 7, 2010

 

 

 

 

 

Positive

Negative

 

 

TRADING MOMENTUM

 

 

 

PLUS ONE OR NEGATIVE ONE

108

21

 

 

Yesterday's Reading

123

21

-15

 

 

 

 

diff

 

MOMENTUM TREND

 

 

 

ONE/ZERO OR ZERO/MINUS ONE

250

43

<--

Key

Yesterday's Reading

249

44

2

 

 

 

 

diff

 

ADVANCE/DECLINE

 

 

% Bullish

UP OR DOWN MOST RECENTLY

128

165

 

43.69%

Yesterday's Reading

144

149

-32

49.15%

 

 

 

diff

 

LONG TRADE VS SHORT TRADE

86

15

 

 

Yesterday's Reading

100

15

-14

 

 

 

 

diff

 

Intermediate-Term Trend

223

68

 

 

Yesterday's Reading

224

67

-2

 

 

 

 

diff

 

GSPC, SP500, MOMENTUM:

 

 

 

 

 

 

 

 

GSPC, M2F ALT READING

82

overbought

 

 

Yesterday's Reading

89

overbought

 

 

Overbought 80-100; Oversold 20-0

 

 

 

 

 

 

 

 

GSPC M4 Plus 21 Short-Term

1

 

 

 

Yesterday's Reading

1

 

 

 

1 bullish; 0 neutral; -1 bearish

 

 

 

 

 

 

 

 

GSPC M4 Plus 21 Long-Term Trend:

1

 

 

 

Yesterday's Reading

1

 

 

 

1 bullish; 0 neutral; -1 bearish

 

 

 

 

 

 

 

 

 

 

distance from

 

 

GSPC TRADING RESISTANCE:

1131.23

9.59

 

 

GSPC Current price:

1121.64

 

 

 

GSPC TRADING SUPPORT

1088.01

33.63

 

 

 





Comments on GSPC chart:

The short-term momentum indicator (M2F Alt, Pane 3 from above, brown line) is overbought again (87) and declining. This is not an indicator that works in isolation, as a stock or index can stay overbought (or oversold) for quite some time, as investor panic-buying or panic-selling 'sticks' the indicator at highs or lows.  Currently it suggests selling may come in.
 
M4 Sum Plus (bottom pane, brown line) continues to reside at +1, meaning buying has come in again. This trend is positive.
 
M4 Sum Plus Trend (bottom pane, black line):  The intermediate Momentum Trend  is +1  -- positive.

M5 3 Momentum (second pane from top, brown line) is at the high end of the range and turning back down,. It can't go alot higher, since it moves in a range. But the momentum of the market is hard to ignore now.  Still M5 3 looks like it wants to pull-back -- which it can do, at times, without much price depreciation.  This is a true leading indicator: it bottoms before prices generally do; it tops before prices do also.
 
T5 Short-Term Trend (second pane from bottom, red line) is in a positive trajectory but a slightly negative pattern (lower low); but it has taken out overhead resistance, which is a positive.
 
T11, Intermediate-Term Trend (second pane from the top, red line): negative.  It is hard to sustain a rally in the opposite direction of this trend line.

 
The GSPC 200-Day Moving Average (top pane, brown line) is WAY ABOVE the GSPC price, creating significant gravitational pressure AGAINST a sustained bullish response in GSPC.
 
Overall: neutral at the moment. The market is overbought short-term and needs to pull back before more buying opportunities appear, especially considering macro conditions.


B.  THOUGHTS ON THE ECONOMY

Where does inflation 'come from'? Accelerating wages to chase prices higher. Accelerating income from investment, from housing bubbles, from increasing debt being spent on consumer products and services.

Where is our inflation going to come from?

From the Fed butchering the dollar and creating another commodities and stock bubble? They're trying. But people can't spend money they don't have. To have real inflation we'll need a political leader, with congressional support, leading a movement to give free money to consumers to buy, buy, buy. Consumers can't take on more debt. Consumers are losing jobs; those with jobs are seeing wages and benefits cut back. Consumers aren't on another Bull Market bandwagon in stocks, transferring investment profits into new houses, new boats, trips to Bora Bora, and into children's college educations. If consumers don't fight one another to get and hoard MORE, MORE, MORE consumer goods and services (such as education and healthcare), driving prices higher and higher, it will be hard to sustain a hyperinflation. Unless food products suddenly all spike and become more rare; and bread begins to sell for $200 a loaf -- welcome to Weimar.

We had our inflation (we didn't call it that, we called it "expansion" but the two are the same thing) from 1983-2010. Now we get our deflation. That's how it looks to me.

We fought one another for material blessings during the expansion. Now we are struggling to get rid of everything we accumulated. Deflation is the 'emptying out' process. Inflation is the 'filling up' process.


Stocks continue to struggle upward -- as we sink deeper and deeper into the Black Forest in terms of the economy.


Some pictures tell a thousand stories -- this picture tells us two.  (1) Ben Bernnanke is running on empty. And (2) he is running out of time.

C.  TRADING SIGNALS

We have a list of issues that might be approaching trading tops (CAUTION GROUP) and issues that might be approaching trading bottoms (INTEREST GROUP).  Gold issues seem to be getting ready to rally.  See the new trading signals below.


CAUTION GROUP

 

8/7/10

 

Madrid General Index Daily

^SMSI_D

Utility Index

^UTY_D

American Express

AXP_D

Baker Hughes Daily

BHI_D

CIT Group Daily

C_D

Livestock ETF

COW_D

Short Gold ETF Daily

DGZ_D

Estee Lauder

EL_D

EMC Daily

EMC_D

Encore Energy Partners

ENP_D

EXPRESA NATIONAL DE ELECT.CHILE

EOC_D

India ETF

EPI_D

Malaysia Index ETF

EWM_D

Spain Index

EWP_D

Singapore Index

EWS_D

FIRST SOLAR

FSLR_D

Euro vs Dollar ETC

FXE_D

Haliburton

HAL_D

Grains ETF

JJG_D

Solar ETF

KWT_D

3-M Daily

MMM_D

Oracle Daily

ORCL_D

Protein Design Labs

PDLI_D

Southern Copper

SCCO_D

Sugar ETF

SGG_D

Banco Santander

STD_D

Synaptics Inc

SYNA_D

Global Solar Energy ETF

TAN_D

Turkey Index ETF

TUR_D

US DOLLAR INDEX BEARISH

UDN_D

 

 

INTEREST GROUP

 

8/7/10

 

CRB Volatility Index Daily

^VIX_D

American Barricks Gold

ABX_D

Short MSCI EAPE Index ETF Daily

EFZ_D

Entremed

ENMD_D

Gold Corp

GG_D

SPDER Gold Shares

GLD_D

Gold Daily

IAU_D

Short utilities ETF Daily

SDP_D

Short Semiconductors ETF Daily

SSG_D

Short Consumer Goods

SZK_D

US DOLLAR INDEX BULLISH ETF

UUP_D

VIX ETF

VXX_D

 



Caution on MMM.  The bottom pane is still positive in M4 Sum Plus Intermediate Momentum and Intermediate Trend (T11).  But M5 3 Test Average is near the top of its range (overbought) and declining.



EWT, Solar Stock ETF: Not much of a rally and already overbought.  I don't see it going much higher, considering the state of housing in America and considering the state of potential home-buyers budgets.  Solar is politically-correct; but it needs to get A LOT cheaper if it is going to become a real part of the cost-efficient pallatte of energy options.



JJG, Grains ETF, have had a wonderful rally.  But the rally is reaching overbought levels.  Put this issue on your list -- if you own it -- of one to look at every day to see if the positive movement breaks down.  If so, take profits.



ORCL, Oracle: Seems to be hitting a plateau.  M5 3 Test Average is near the top of its range.  A good sell signal would be when M4 Sum Plus (bottom pane) goes to -1.



SMSI, Spain Index: I think Spain will collapse socially much the same way Greece will -- except Spain has the national character to look for discipline through a fascist regime, something Greece will always fight against -- but this index (why would anyone want to buy Spain?) is reaching overbought levels and should be on everyone's watch list for potential profit-taking and then short-sale.



SYNA, Synaptics: Has already broken down in price (short-trend, orange, bottom pane) is negative; intermediate-trend, red, bottom pain is flattening out).  I expect M4 Sum Plus to go negative soon.  In using this indicator as a trading system, we work with M5 3 Test Average and the trends below in Pane 2.  We watch the momentum readings in the buy or sell zones and watch the trends to flip.



TUR, Turkey ETF: great run.  I'm not sure the values of many of these 'alternative markets" are really as great as some investors claim -- and I think the ETF's are a bit of a gimmick to seduce investors into thinking they are really international investors -- if you are paid in US Dollars you are not really an internatinal investor -- and this one seems like it's reaching its max momentum again.



UDN, Bearish US Dollar ETF: Is the Dollar's long decline about ready to end?  Both UDN (and its opposite, UUP, see below) suggest it may be.  Remember: don't trade these "Caution" or "Interest" readings...but get ready to trade.



ABX, American Barricks Gold: One of many gold issues showing possible change in momentum direction up.  See M4 Sum Plus (Pane Two) has already ticked up to +1.  Gold issues did not get sold much during their recent pullback.  This, in itself, should make one cautious on stocks -- add in the fact that Inverse Stock ETFs, US Dollar ETF, VIX ETF (anti-stock Volatility Index) also show up on this list of issues pointing up.



GG, Goldcorp: Getting ready to pop up, along with all the other gold stocks?



EFZ, Short the MSCI EAFE Index: profits when stocks in E(urope), A(ustralia), and the F(ar) E(ast) decline.  If world stock markets decline, EFZ should appreciate.



SSG, Short Semiconductors ETF: this is a warning that semiconduct stocks may be topping.  If one looks at charts of INTC, MOT, AMD, NVDA, then seems very possible.  Again, we are not BUYING SSG at this point: we are adding it to our 'interested' list.



UUP, US Dollar Bullish ETF: Dollar is trying to put in a bottom for the first time since the June 2010 sell-off began.

So, can we trade using these indicators?  Yes.  We have three new trades using this system.



DGZ, Short Gold ETF: Another gold-bullish play.  Shorting this short is the same as going long gold issues.



GLD, Spider Gold Shares ETF: Buy Signal.  M5 3 Test Average is oversold (less than zero) and turning up -- and both trend are positive (Pane #2).



IAU, Gold ETF: Physical gold seems to be going higher, after a rarther anemic sell-off.





More information on the CGTS systems can be found at:

http://home.mindspring.com/~mclark7/CGTS09.htm

 

MICHAEL J CLARK
Clark's Gate Timing System
Hanoi, Vietnam

84 4 221 92210




Disclosure: No positions to disclose.

Disclosure: No positions to disclose.