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CGTS DAILY FOR MONDAY, 16 AUGUST: BLOOD ON THE STREETS? MARKETS LOOK TO GET UGLY AGAIN

|Includes:AA, AIG, AMTD, American Express Company (AXP), CAT, CGW, EA, FXE, GS, JO, KOL, ORCL, SAP, UHN, VZ
CLARK'S GATE TIMING SYSTEM
  FOR: 16 AUGUST 2010
- MONDAY

A.  MARKET MOMENTUM

CGTS VIEW: Two weeks ago we proclaimed the 'end of the rally'.  It was a bit early.  We are repeating our call now.  We are seeing so many short-selling opportunities in the market now that we can't help but call this a market top.  We are providing charts below to illustrate this view.  Also see a long list of potential shortsales that showed up on the screen we ran using parameters outlined in this article.

Is this a crash that is coming?  It's possible.  Most of the global markets we look at bear a striking resemblance.  All are topping; all are having tops confirmed.  The dollar is rallying.  The anti-dollar indexes and commodities are getting ready to go under again.

From our numbers below, clearly momentum has broken down.

Our key short-term momentum indicator -- numbers hitting +1 (positive) or -1 (negative) is now only 9% bullish.  189 issues are hitting -1 (bearish); only 19 are hitting +1 (bullish).

The key intermediate-term Momentum Trend (those in the positive zone of 1-0 versus those in the negative zone of 0-negative 1) continues to lose ground, now only 62% bullish, down from nearly 90% last week.

The Advance-Decline Line (most recent moves up or down) is at a very low 18% bullish, up from 10% bullish two days ago.

Only 14 issues meet our criteria for a long trade (+1 M4 Sum Plus and Intermediate trend positive), while 74 meet our criteria for a short trade (-1 M4 Sum Plus and IT Trend negative).  This is only 16% bullish

The intermediate-term trend of most issues are still positive (204, from 232 on Wednesday), but this is a lagging indicator.

August 15, 2010
 
 
 
 
 
Positive
Negative
 
 
Key Short-Term
 
 
 
 
TRADING MOMENTUM
 
 
% Bullish
PLUS ONE OR NEGATIVE ONE
19
189
 
9%
Yesterday's Reading
26
192
-4
12%
 
 
 
diff
 
Key Long-Term
 
 
 
 
MOMENTUM TREND
 
 
% Bullish
ONE/ZERO OR ZERO/MINUS ONE
192
118
 
62%
Yesterday's Reading
202
108
-20
65%
 
 
 
diff
 
 
 
 
 
 
ADVANCE/DECLINE
 
 
% Bullish
UP OR DOWN MOST RECENTLY
58
252
 
18.71%
Yesterday's Reading
52
258
12
16.77%
 
 
 
diff
 
 
 
 
 
 
 
 
 
 
% Bullish
LONG TRADE VS SHORT TRADE
14
74
 
15.91%
Yesterday's Reading
17
64
-13
20.99%
 
 
 
diff
 
 
 
 
 
 
 
 
 
 
% Bullish
Intermediate-Term Trend
204
103
 
66.45%
Yesterday's Reading
218
89
-28
71.01%
 
 
 
diff
 
GSPC, SP500, MOMENTUM:
 
 
 
 
 
 
 
 
GSPC, M2F ALT READING
0
Oversold
 
 
Yesterday's Reading
0
Oversold
 
 
Overbought 80-100; Oversold 20-0
 
 
 
 
 
 
 
 
GSPC M4 Plus 21 Short-Term
0
Selling
 
 
Yesterday's Reading
0
Selling
 
 
1 bullish; 0 neutral; -1 bearish
 
 
 
 
 
 
 
 
GSPC M4 Plus 21 Long-Term Trend:
1
Buying
 
 
Yesterday's Reading
1
Buying
 
 
1 bullish; 0 neutral; -1 bearish
 
 
 
 
 
 
 
 
 
 
distance from
 
 
GSPC TRADING RESISTANCE:
1131.23
51.98
 
 
GSPC Current price:
1079.25
 
 
 
GSPC TRADING SUPPORT
1088.01
-8.76
New Low
 
 
 
 
 
 
 




Comments on GSPC chart:

The short-term momentum indicator (M2F Alt, Pane 3 from above, brown line) is oversold, so, short-term, we will be approaching an an attempted bottoming
 
M4 Sum Plus (bottom pane, brown line) continues to reside at 0, having clicked down from +1: selling or a sidways market is likely until it clicks back up. This trend is negative at the moment and suggests selling continuing.
 
M4 Sum Plus Trend (bottom pane, black line):  The intermediate Momentum Trend  is +1  -- positive.

M5 3 Momentum (second pane from top, brown line) This key indicator has broken support and is suggesting we are at a major top and will have a substantial decline.  The difference between my call two weeks ago for the end to this rally and today is that two weeks ago M5 3 was not in a freefall.  Today it seems to be entering a freefall.  Time will tell.  It is breaking support, which usually means selling is coming.
 
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.
 
Overall: negative at the moment.  A look at a couple more charts helps to explain the negativity.

Watch the top pane, the black line, M5 3 Test Average.  This is a long-term overbought/oversold momentum indicator, moving between (about) +100 and -100 ranges.  Positive 50 is overbought; Negative 50 is oversold.  When this indicator is topping and is overbought, it is proclaiming a top.  Look below to the second pane from the top, at the black line, M4 Sum Plus: when this indicator is -1 for two days in a row (ignore spikes up or down), this confirms the sell signal.  The bottom pane has two other indicators that measure intermediate-term momentum.  The DJIA is giving a short-sell signal now.  We expect more selling.  The black line (top pane), to reach a bottom, must cross the corresponding brown line (M5 3 Avg Differential) AND M4 Sum Plus (Pane 2) must confirm the bottom with two days at +1.



FCHI, French CAC Index (below): similar picture.  Top, prices heading lower.



OEX, S&P 100 Index, also appears to be topping.



FXE, Euro VS US Dollar ETF.  A stronger US Dollar now seems to be the bane of stocks -- and the weak stock rally over the last month has been 'fueled' (perhaps too strong a word, since the fuel was rather watered down) by a Dollar correction.  The Euro seems to be topping; and the Dollar seems to be bottoming.




B.  THOUGHTS ON THE ECONOMY

Felix Salmon wrote yesterday about an exchange between CNBC’s Rick Santelli unloaded today on Steve Ricchiuto of Mizuho. I quote from Felix Salmon's article:

"The cause of the rant was a quote from Pimco’s Bill Gross, saying that he would only buy mortgages sans a government guarantee if first-time homebuyers were forced to make 30% down payments.

"The immediate cause of the rant, however, was Ricchiuto, who was proposing that the government solve the problem that people can’t refinance their homes. “They’ve got to go out and change the ability to refinance,” he said, prompting Santelli to ask why. When Ricchiuto responds that it’s “because the banks won’t do it”, Santelli’s rant arrives:

Banks won’t do it because the government has subsidized lending to a level no rational person — you wouldn’t, with your money, sir, let somebody buy a house with nothing down and basically a free ride to risk on an unsecured loan.

"Richhiuto is game enough to respond, saying that government intervention is “the only way to get the housing market going.”

"Santelli, however, is having none of it:

Then the housing market’s no good, and we should let it seek its bottom. The government can’t fix it."



Santelli is right. We don't 'need to get the housing market moving again.

We need housing devaluation to continue, even more dramatically. The housing bubble pushed housing prices in to the stratosphere. We need them to come back to consumers' salary levels so they can become affordable again WITHOUT liar loans, cheater-loans, and guaranteed-to-default loans (0 down, unsecured loans). Our banks lost their integrity because the housing price appreciation moved housing purchases far out of the affordable range of most Americans -- the banks, to profit off this phenomenon, were 'saved' by Wall Street banks who created a mechanism for packaging guaranteed-to-default loans with other, more traditionally-packaged loans (ie, with borrowers who actually met the banks' qualification requirements) that would neutralize the cancerous loans....unless we bring housing prices back down to the level of American salaries, without the trick loans, the easy-default loans, there will be no stabilization of housing in America. Housing historically appreciates 2% or so a year, in life with American salary increases. In 2001-2007, housing in some areas appreciated 250%. We have to eliminate all that air in the cost of housing in America if we really want to stabilize the housing picture.


Stocks have topped short-term.  We'll see if the buy-the-dips philosphy continues to work.  I believe stocks will seek a much lower bottom, based on an economy that can't be fixed, and a Fed Chair who has run out of ideas and ammunition.


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 LOT of shortselling ideas today -- and one long position.

The SAP chart below shows the system pretty clearly.  The black line in Pane One is the key indicator.  When it is overbought (positive) and declining, one has to pay attention.  Confirmation is made in Pane 2 by the black line M4 Sum Plus -- 2 days at -1 is bearish; 2 days at +1 is bulish.  How do we recognize a bottom using this system?  We want M5 3 Average (black line) in the top pane to be below zero and turning up.  It needs to go through its companion indicator, brown line, top pane AND it needs to be confirmed as a bottom by M4 Sum Plus in Pane 2.  The bottom pane have two other momentum indicators that also can be useful -- but they are secondary.

How to read SAP.  Top in late July, significant decline but not near a bottom yet.  First sign of a bottom will be black line cutting through brown line (top pane); that hasn't happened yet.  SAP is right at support (44 roughly).  My prediction is that support will not hold.  I expect it to test May support at 40.95.



VZ, Verizon Communications.  Appears to be making a top, BUT this has not yet been confirmed below.  However, juding from the three earlier tops, this confirmation is only a matter of time.  But, we're waiting.



One of our readers wants to know if it's too early to buy more SYNA.  Yes, too early.  We can't guarantee it will go alot lower; our inclination is that it will go down to support -- which means a loss of at least 3 more points.  It may have small rallies in between now and its actual bottom (see earlier part of chart) -- but, for us to have an interest in SYNA long, the M5 3 average has to bottom in oversold territory and turn up and be confirmed below.



BP, British Petroleum.  The BP top has not been confirmed by M4 Sum Plus below -- it HAS been confirmed by the 'cheater' M5/M5 Average Diff Asp indicator in the bottom pane, which usually gives readings earlier but is not always reliable.  It looks like a top and smells like a top and feels like a top -- but we need our confirmation.



AXP, American Express: looks to be topping.



AIG: looks to be making a top and should test 34.52 support.



ORCL, Oracle, has already given up quite a bit of ground.  It has more ground to give up.



KO, Coal ETF.  More selling coming; in fact, most of the commodity ETFs linked with an economic recovery (steel, industrial metals and materials, aluminum, copper) look bad.



A lot of people LOVE Caterpiller.  Looks like it's time to take some profits.



CGW, Global Water ETF: topping.  Should test 17.07 support; if that fails, then 16.48 support.



CAAS, Chinese Auto Daily: This is actually a Bear Market chart picture: lower lows and lower highs.  If it takes out support at 15.88 and then at 14.75, the Bear Market picture is confirmed.




The stock I, personally, love to hate, Goldman Sachs, is breaking down again.  It is, at the moment, not confirmed by M4 Sum Plus, but it is confirmed by the 'cheater' confirmation in the bottom pane.  Another day of M4 Sum Plus at -1 and this top will be confirmed.



JO, Coffee ETF.  For those who say I am a perma-bear (I'm clearly NOT a perma-bear, or I would not have buy-signal parameters with this system), this issue looks like a buy and seems ready to take off.



Ameritrade does not look so good, coming off a very weak rally.  Looks like it's going to be testing old lows.



ERTS, Electronic Arts, one of my favorite whipping boys over the last two years: get out the whip again.  The rally was weak; and the rally has ended.  It's going lower.



The oil-aggregate ETFs all look weak, including DBO.  More selling looks pretty much guaranteed in Heating Oil below.



XRT, Retailers ETF.  Hold your hats.  This one looks to be coming down.  The economic news is just going to get worse and worse.



AA, Aluminum Company of America, had a weak rally off May lows and now appears to be going down again.  This chart is a very bearish picture -- and becomes worse if the coming sell-off breaks below 10.



SCREEN OF POTENTIAL SHORTSALES MEETING ABOVE PARAMETERS.

Potential Shortsells Visual
^AORD_D 4,480.90
^BVSP_D 66,264.43
^DJI_D 10,303.15
^DJT_D 4,201.81
^FCHI_D 3,610.91
^GDAXI_D 6,110.41
^GSPC_D 1,079.25
^KS11_D 1,746.24
^NDX_D 1,818.80
^OEX_D 490.59
^SMSI_D 1,063.15
^XOI_D 977.596
AA_D 10.64
ACH_D 20.27
ADBE_D 28.01
AIG_D 36.67
AMSC_D 17.4
AMTD_D 15.415
ARE_D 67.35
ARO_D 67.35
AXP_D 41.73
BA_D 64.84
BBL_D 60.54
BBL_D 60.54
BEAV_D 27.35
BLK_D 151.58
BWLD_D 40.18
BWLD_D 40.18
CAT_D 68.01
CGW_D 17.6
CGW_D 17.6
CLI_D 30.83
CLI_D 30.83
COL_D 55.46
CPA_D 49.79
CRM_D 97.24
CSCO_D 21.36
CSUN_D 3.995
DBO_D 24.02
DBO_D 24.02
DE_D 64.85
DRYS_D 4.45
ELNK_D 8.51
ELNK_D 8.51
ELY_D 6.41
ELY_D 6.41
ENP_D 18.6
EOC_D 49.99
EPP_D 39.31
EQR_D 44.88
ERTS_D 15.67
ETFC_D 13.95
EURCAD=X 1.328
EURCNY=X 8.672
EWG_D 20.13
EWJ_D 9.44
EWM_D 12.23
EWP_D 37.62
EWQ_D 21.64
EWS_D 12
F_D 12.15
FIO_D 23.586
FMCN_D 17.7
FST_D 27.75
FXA_D 89.41
FXB_D 155.26
FXE_D 127.08
FXM_D 78.5
GE_D 15.38
GGB_D 14.13
GGB_D 14.13
GS_D 148.08
GS_D 148.08
HAL_D 28.1
HAL_D 28.1
HD_D 27.31
HD_D 27.31
HMA_D 6.65
HME_D 48.57
HME_D 48.57
HOG_D 25.57
HOG_D 25.57
HON_D 41.32
HURN_D 18.87
IBM_D 127.87
ICON_D 15.45
IDX_D 75.24
IO_D 4.08
IYR_D 50.43
IYR_D 50.43
JCI_D 27.37
JJM_D 37.47
JJU_D 28.91
KLAC_D 29.1
KOL_D 32.99
KOL_D 32.99
KSU_D 34.44
MGM_D 10.09
MMM_D 84.01
MSFT_D 24.4
MTL_D 21.68
MWW_D 11.67
NFX_D 50.6
NFX_D 50.6
NKE_D 70.58
NKE_D 70.58
NZDUSD=X 0.706
ORCL_D 22.66
ORCL_D 22.6
PDE_D 23.44
PDLI_D 5.18
POL_D 9.73
PPA_D 16.46
QCOM_D 37.95
QQQQ_D 44.72
RBS_D 14.6
RHT_D 30.93
RHT_D 30.93
RIMM_D 53.4
ROK_D 51.47
ROK_D 51.47
RS_D 38.36
RSX_D 30.72
RSX_D 30.72
RY_D 49.15
SAH_D 8.53
SAH_D 8.53
SAP_D 44.43
SBUX_D 23.99
SEA_D 26.83
SLAFX_D 48.62
SLG_D 57.02
SLX_D 58.21
STD_D 12.07
TD_D 68.16
TSLA_D 18.32
TUR_D 59.53
TUR_D 59.53
TWX_D 30.81
TWX_D 30.81
TXN_D 24.28
UDN_D 25.72
UGA_D 31.91
UHN_D 24.51
UHN_D 24.51
UPS_D 64.44
UPS_D 64.44
UTX_D 70.7
UTX_D 70.7
VALE_D 27.75
VCI_D 31.17
VNQ_D 49.78
VNQ_D 49.78
VZ_D watch
WGC_D 25.84
WMT_D 50.4
X_D 45.1
XES_D 26.64
XES_D 26.64
XHB_D 14.15
XME_D 48.61
XME_D 48.61
XOM_D 59.91
XOM_D 59.91
XOP_D 40.23
XRT_D 36.88


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.
Stocks: AXP, GS, AA, CAT, EA, VZ, SAP, AIG, JO, CGW, FXE, KOL, UHN, AMTD, ORCL