FOR: 16 SEPTEMBER 2010, THURSDAY
CGTS VIEW: The momentum picture is clearly one of a pause in the market advance, an easing of the upward thrust. We're not ready to call this anything more than a pause at this point; although we are getting some interesting 'sell' signals (profit-taking signals), some of which are included below.
A Look At The News:
•Probably the most interesting news of the day, at least to me, was India's central bank raising its repo rate and reverse repo rate more than expected -- its fifth such hike this year. Inflation is a major problem in India -- as it also is becoming in China -- and more such hikes are expect when the bank meets again in November. From April to June, 2010, average monthly inflation was 10.6% in India. Food was up 14%; non-food items were up nearly 9%. Once a government/banking system starts force-feeding inflation (economic growth), stopping it is like trying to turn a battleship around. During the same period the economy grew 8%, which is pretty impressive -- but if it costs you 10% to get 8% economic growth, then you are going the wrong direction, aren't you?
Irresponsiable fiscal policy will bring horrible consequences -- have already brought horrible consequences. What do you think a monthly 10% inflation rate is doing to India's poor?
•Former FDIC Chairman William Isaac laments Washington's response to the 2007 financial crisis has essentially been a wasted opportunity. Isaac says the financial world seems safer, “in the sense things have calmed down and the banking industry has raised a lot more capital, (however) we have not changed anything, material, in terms, of how we regulate banks and none of the things that have led to this crisis have been fixed.”
•Banks are starting to pick up the pace of actually taking possession of foreclosed property. Banks repossessed 95,364 properties in August, up 3% from July and up 25% over the year.
•Unemployment data hangs over the market on Thursday, with expectations being for an increase of first-time claims for unemployment insurance.
A. MARKET MOMENTUM
- Our key Short-Term Momentum Indicator -- numbers hitting +1 (positive) or -1 (negative). OVERBOUGHT: OVER 80% BULLISH; OVERSOLD: UNDER 20% BULLISH. CURRENT READING: 56%v 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). OVERBOUGHT: OVER 75% BULLISH; OVERSOLD: UNDER 25% BULLISH. CURRENT READING: 80% BULLISH.
- The Advance-Decline Line (most recent moves are either up or down). OVERBOUGHT: OVER 75% BULLISH; OVERSOLD: UNDER 25% BULLISH. CURRENT READING: 62%v BULLISH.
Criteria for a Long Trade (+1 M4 Sum Plus and Intermediate trend positive), down from 36 on Thursday. CURENTLY 35%v OF ISSUES MEET THESE BUY CONDITIONS.
- The Intermediate-Term Trend positive instead of negative. CURRENTLY: 69^% IT TREND POSITIVE.
- The key Long-Term Momentum Indicator (measures distance between M5 3 Indicator and M5 3 Average) -- when above 0 (indicator above its average), bullish; when below 0 (indicator below its average), bearish. CURRENT READING: 75%v BULLISH.
- note: ^ advancing; v declining.
The BKX is pausing, stuttering. M5 3 (brown line, Top Pane) is still positive in terms of its higher highs and higher lows pattern; the M5/M5Average Differential (black line, Bottom Pane) looks to be starting a drift downward.
FTSE is overextended on the up-side. It should pull back from here a bit. Watch for M4 Sum Plus (Middle Pane, black line) to turn down -- as long as it stays above -1 then the rally should continue.
Shanghai is an ugly chart. It's hard to know what to make of it. Consolidating -- M4 Sum Plus (Middle Pane, black line) has broken down to -1, but we'll need to keep watching this as a spike down and then back up means only that the selling could not take hold. M5 3 (Top Pane, brown line) is suggesting prices will head lower.
Are T Bonds dead? We've all been reading a lot about the bond bubble and how it's popping. This chart doesn't show that. TYO is an ETF that shorts the 10-Year TBond -- it goes up when the 10-Year TBond declines. It has had a bit of a rally -- a feeble rally. It's M5 3 indicator has jumped up dramatically. But the price hasn't really followed it. I think TBonds are getting ready to start going back up.
The bull market in commodities? It's simply an anti-Dollar play, isn't it? Where does one put his/her money when all the currencies in the world are becoming worthless? Into gold, into silver, into commodities....into TBonds (hope against hope) -- the whole world, except India perhaps, wants a weaker currency. Japan is openly attacking its currency in the Forex markets. Bernanke is clearly attacking his own currency through his monetary policy. Are exports the last hope of saving the global economy? If everyone is selling, who will be buying? Probably the countries with the least debt.
TBT -- ETF shorting 20+ year TBonds has rallied a bit stronger than TYO during this 'Bond Collapse' we've been going through. But this rally, too, seems to be petering out (interesting expressing). This rally may be pausing; or it may be running out of steam. We'll see.
USDollar Bullish ETF: Has tanked badly after President Bernanke's proclamation in Jackson Hole last month that he would do anything he had to do to keep spending money (is that what he said?). The Dollar chart is suddenly very ugly -- and a rally has turned in to a freefall. How can the Dollar rally when President Bernanke makes it clear he is an enemy of Dollar strength?
THOUGHTS ON THE MARKET
We are seeing some sell signals (profit-taking signals) in one of our most accurate trading systems, M4 Sum Plus Spike.
BEAV, BE Aeorspace, is suggesting it might be time to take some profits. It could be a bit early to sell BEAV -- but we'll take a healthy gain and start looking for other stocks to buy.
BKX has had a rally -- but it is VERY weak and the channels are still down for it. Eager to take profits here; we expect this to give us a short-sell signal fairly soon.
DOL, Rockwell Collins. Seems to be reaching its limit during this rally phase.
CDE, Coeur D'Alene Silver Mining. Here is an example of what a chart looks like in a bull move, instead of in a trading range pattern. M5 3 Average (Top Pane, black line) has been turned almost into a straight line. M4 Sum Plus (Middle Pane, black line, has been living at +1 for almost a month. We're bullish on gold/silver for almost another decade. The real fun has not even started yet.
Natural Gas ETF: Lower and lower. Cover a shortsell and get ready for another one, perhaps.
IGT, International Gaming Technology. We featured this one as a shortsell signal last night (M4 Spike System). It came up again tonight for a different trading system (M5 3 Test LT).
RSX, Russian ETF: looks like its ready to retreat a bit. Take profits and get ready to reload.
SLX, Steel ETF: Looks like its had its rally. It might go higher -- but the M5/M5 Differential (Bottom Pane, black line) seems to be weakening -- and M4 Sum Plus (Middle Pane, black line) has broken down to zero. Don't be greedy.
UGA, US Gasoline ETF: Looks like another shortsale prospect.
VCI, Valassis Communications: Take profits. Seems to be topping.
More information on the CGTS systems can be found at:
MICHAEL J CLARK
Clark's Gate Timing System
84 4 221 92210
Disclosure: NO POSITIONS TO DISCLOSE.