Sunday June 8, 2014
Week in Review
Another week and yet another record for the major North American Indices. For two consecutive weeks we have been waiting for the S&P to retrace and allow for re-entry into bullish positions. The sentiment from last week’s note was to maintain current bullish positions and not to add due to the market moving a number of percentage points without a pullback. Part of our sentiment was inaccurate as we were expecting the pullback for confirmation of bullish sentiment. As price continues to move at a wicked pace, we are expecting the pullback/retracement to be sharp given the speed at which the market has been moving.
S&P 500 Index 1 Year Daily Chart
If you weren’t holding long positions going into last week, then, you missed some decent action. That doesn’t mean you have missed out on all of the opportunities, the market will always be there for you. Just remember to pick and choose your shots!
The Dow Jones Industrial was also able to trade into a new all-time high. The sentiment for retail investors is jubilant as there are a plethora of new brokerage commercials coming online to entice people to stop waiting and start investing. It’s pretty funny, really. Where were these advertisements 4 years, ago? We are not insinuating, anything.
Dow Jones Industrial Index 1 Year Daily Chart
The sentiment from a global perspective remains robust, as well. There are only 3 major indices in the red for the year. Keep in mind that when making investment decisions while the market or stock being reviewed is at all-time highs, the most important issues (if we can call it that) that a retail investor must deal with is timing/correlation and money management. It is difficult to price in the unknown. It is much easier to price in what you’re willing to part with in the event you are wrong.
Global Markets
GLOBAL MARKETS May 11, 2014
Week
Month
Year to Date
GLOBAL MARKETS May 11, 2014
Week
Month
Year to Date
US - S&P 500
+1.30%
+1.27%
+6.41%
US - DOW JONES INDUSTRIAL AVERAGE
+1.15%
+1.08%
+2.94%
US - NASDAQ COMPOSITE
+1.78%
+1.99%
+4.30%
US - RUSSELL 2000 - RUT
+2.51%
+3.22%
+1.26%
CHINA - SHANGHAI COMPOSITE
-0.54%
-1.59
-5.48%
TORONTO STOCK EXCHANGE - TSX
+1.29%
+1.08%
+9.16%
GERMAN STOCK EXCHANGE - DAX
+0.02%
-0.02%
+5.83%
LONDON STOCK EXCHANGE - FSTE 500 INDEX
-0.08%
-0.74%
+1.42%
SINGAPORE STRAITS TIMES INDEX - STI
-0.13%
-0.09%
+3.93%
STOCK EXCHANGE OF THAILAND - SET
+0.18%
+2.33%
+14.67%
JAPANESE STOCK MARKET - NIKKEI 225
+2.69%
+0.96%
-7.44%
HONG KONG - HANG SENG INDEX
-0.75%
-1.46
-1.67%
AUSTRALIAN SECURITIES EXCHANGE - ASX
-0.37%
-1.48%
+1.29%
BOMBAY STOCK EXCHANGE - BSE - SENSITIVITY INDEX - SENSEX
-4.22%
+2.88%
+21.58%
BRAZIL STOCK EXCHANGE - BOVESPA STOCK INDEX
+3.69%
+2.95%
+5.54%
ITALIAN STOCK EXCHANGE FTSE- MIB
+2.42%
0.00%
+7.34%
MoneyFlow Performance June 2014
SYMBOL
DIRECTION
ENTRY
STOP
TARGET
DR/CR
ROI
SYMBOL
DIRECTION
ENTRY
STOP
TARGET
DR/CR
ROI
PPL
Long
>$32.54
>$36.70
-0.94%
ES
Long
>$1876
>1954.25
+30%
XLV
Bull Put
>$58.32
>$59.81
$0.69
+5%
EWG
Long
>$31.16
>$32.24
+0.55%
XLB
Bull Call
>$47.92
>$48.83
$1.39
+13.7%
EWG
Long
>$31.16
>$32.24
+1.28%
MONTHLY TOTAL: +8.26%
S&P 500 Futures 1 Year Daily Chart
Materials Sector ETF 1 Year Daily Chart
Wealthy Bucket Multi-Asset Investment Model
As we move through the investment model this week, there are very few adjustments until the model works its way into equities.
Economics This Week
Country
Date
Event
Significance
Expectation
Trend
Country
Date
Event
Significance
Expectation
Trend
JPN
6/8/2014
GDP Growth Rate Annualized
Merit Extra Attention
> than previous
Up
JPN
6/8/2014
Consumer Confidence
Merit Extra Attention
> than previous
Down
CHN
6/9/2014
Inflation Rate Y/Y
Market Moving Indicator
> than previous
Flat
EU
6/9/2014
Industrial Production Y/Y
Merit Extra Attention
> than previous
Flat
AUS
6/10/2014
Westpac Consumer Confidence Index
Market Moving Indicator
> than previous
Flat
UK
6/10/2014
Industrial Production Y/Y
Merit Extra Attention
> than previous
Down
AUS
6/11/2014
Unemployment Rate
Merit Extra Attention
> than previous
Flat
AUS
6/11/2014
Employment Change
Market Moving Indicator
Down
UK
6/11/2014
Unemployment Rate
Market Moving Indicator
Down
CHN
6/12/2014
Retail Sales Y/Y
Merit Extra Attention
> than previous
Flat
CHN
6/12/2014
Industrial Production Y/Y
Merit Extra Attention
> than previous
Up
GER
6/12/2014
Inflation Rate Y/Y Final
Merit Extra Attention
Down
JPN
6/12/2014
BoJ Interest Rate Decision
Market Moving Indicator
No Change
Flat
USA
6/12/2014
Retail Sales Y/Y
Market Moving Indicator
> than previous
Flat
USA
6/12/2014
Initial Jobless Claims
Merit Extra Attention
Flat
USA
6/13/2014
PPI Y/Y
Merit Extra Attention
> than previous
Up
USA
6/13/2014
PPI M/M
Merit Extra Attention
Up
USA
6/13/2014
Core PPI M/M
Merit Extra Attention
Up
JPN
6/15/2014
BoJ Monthly Report
Market Moving Indicator
No Forecast
G7 Currency Forecast
Euro Futures
As forecasted, the ECB cut its key lending rate and the reverberations were felt quickly in Euro. We had prepared for a short Euro idea, that is still pending; however, price may have moved down too far already. Maintenance will not be required going into the new week as all levels are being respected.
Euro Futures 1 Year Daily Chart
British Pound Futures
This is the ideal level to look for a short in Sterling as illustrated in the graph. A close below immediate resistance and the reward to risk profile is attractive. The play is expected to move down towards intermediate support. The graph will not require maintenance going into the new week as all levels are being respected.
British Pound Futures 1 Year Daily Chart
Swiss Franc Futures
The graph will not require maintenance going into the new week as all levels are being respected.
Swiss Franc Futures 1 Year Daily Chart
Australian Dollar Futures
The base/immediate support is holding; however, the Aussie is rolling over at lower and lower highs should price continue to selloff on Monday. If you can withstand the risk and the timeframe, Aussie is showing signs of a classic breakdown pattern. We generally do not get into trades based on patterns simply because they are not as reliable. The graph will not require maintenance going into the new week as all levels are being respected.
Australian Dollar Futures 1 Year Daily Chart
Canadian Dollar Futures
The graph will not require maintenance going into the new week as all levels are being respected.
Canadian Dollar Futures 1 Year Daily Chart
Japanese Yen Futures
Recall that we raised immediate support last week to time the possible breakdown in Yen faster. We did this so that we could confirm that holding long equities was the right call. It was. The graph will not require maintenance going into the new week as all levels are being respected.
Japanese Yen Futures 1 Year Daily Chart
U.S. Dollar Futures
The positive correlation remains intact with equities and especially since the ECB lowered rates. We are really seeing the 2005-2008 market correlation resurrect. The current price of Dollar and where it stands relative to immediate support represents an attractive bullish opportunity. Well worth the risk for the reward. The graph will not require maintenance going into the new week as all levels are being respected.
U.S. Dollar Futures 1 Year Daily Chart
Commodity Forecast
Crude Futures
Recall our note from last week. We had raised immediate support to ascertain whether or not the larger channel in Crude would continue. Currently, the immediate support is holding which would allow us to maintain our near-term bullish outlook for the ‘Sweet Stuff’. The graph will not require maintenance going into the new week as all levels are being respected.
Crude Futures 1 Year Daily Chart
Copper Futures
We definitely missed the trade. We had set-up an entry last week and it was too late. Price has already moved south. Remember, we have identified the major support level for copper that may determine a possible shift in demand, which was seen in the Great Recession. Just keep an eye on this. The graph will not require maintenance going into the new week as all levels are being respected.
Copper Futures 3 Year Weekly Chart
Natural Gas Futures
Immediate resistance has been revised to $4.74-$4.827 and immediate support has been revised to $4.313-$4.406. Should price trade into immediate resistance and rally away (below), then, this represents an attractive short opportunity due to the price channel. That said, if price does not close below $4.586, then, the idea should be liquidated. Using a shorter timeframe (15mins) will assist with timing the entry.
Natural Gas Futures 1 Year Daily Chart
Gold Futures
The negative relationship with equities continues. This really does remind us of 2005-2008. Being long equities and long gold may hedge some risk based on this relationship. Proper control of inventory is a must if gold is being used to hedge directional risk. The graph will not require maintenance going into the new week as all levels are being respected.
Gold Futures 1 Year Daily Chart
Wheat Futures
It would be nice to think that we could simply buy wheat at these levels and ride it back to the high. Investing would be way too easy if that were the case. We have adjusted immediate resistance to $637.25-$645 for those who feel that they would like to take a bullish position in wheat or have already done so.
Wheat Futures 1 Year Daily Chart
Soy Futures
We have made two revisions to soy this week. New support has been identified between $1433.50-$1443.51 and $1381.25-$1396. All other levels will remain going into the new week. The distance to the nearest level does not provide an attractive opportunity.
Soy Futures 1 Year Daily Chart
Corn Futures
Our immediate support in corn was inaccurate. We have made the adjustment going into the new week between $440.25-$450. Since our immediate support was inaccurate, we missed the set-up/opportunity.
Corn Futures 1 Year Daily Chart
We believe the Equity markets move in a direction based on the correlation to Currency and Commodity markets. This is exactly the reason why the Multi-Asset Investment Model is used as our indicator of market direction and conviction of money flows. Once the analysis arrives at the Index Future, Broad Market and Sector forecast segments of the commentary; most of the heavy lifting has been completed. All that remains are the trend and levels that may require adjustment for market timing purposes. When used consistently, the multi-asset investment model can time market moves with a high degree of accuracy.
Index Futures Forecast
S&P 500 Futures
Immediate support has been raised to 1916-1927. All other levels and targets will remain from the previous week.
S&P 500 Futures 1 Year Daily Chart
Dow Futures
Immediate support has been raised to 16,662 – 16,727 and a new target has been identified at 17.131. All other levels will remain from the pervious week.
Dow Futures 1 Year Daily Chart
NASDAQ Futures
Immediate support has been raised to 3714 – 3749.25 and intermediate support has been revised to 3631.25-3659.75. Additionally a new target has been identified at 3911.64.
NASDAQ Futures 1 Year Daily Chart
Russell Futures
Immediate support has been raised to 1118.50 – 1131.80 and intermediate support has been revised to 1092.90 – 1106.10. Additionally, immediate resistance has been revised to 1179 – 1188.50. All other levels will remain from the previous week.
Russell Futures 1 Year Daily Chart
Broad Market Forecast
S&P 500 Index
Immediate support has been raised to 1923.06 – 1928.63 and intermediate support has been revised to 1907.30 – 1914.46. All other levels will remain from the previous week.
S&P 500 Index 1 Year Daily Chart
Dow Jones Industrial Average
Immediate support has been raised to 16,673.75 – 16,756.64 and additional guidance has been identified at 17,047.06 and 17,481.38.
Dow Jones Industrial Average 1 Year Daily Chart
NASDAQ Composite Index
Immediate support has been raised to 4222.04 – 4247.96. All other levels will remain from the previous week.
NASDAQ Composite Index 1 Year Daily Chart
Russell 2000 Index
Immediate support has been raised to 1122.91 – 1132.75 and immediate resistance has been revised to 1187.66 – 1196.70.
Russell 2000 Index
Sector Forecast
Industrials
Immediate support has been raised to $54.06 – $54.37. All other levels will remain from the previous week.
Industrials Sector ETF 1 Year Daily Chart
Financials
Immediate support has been raised to $22.28 – $22.46 and intermediate support has been modified to $21.87-$22.06. Additional guidance has been identified at $24.70.
Financials Sector ETF 1 Year Daily Chart
Materials
Immediate support has been raised to $49.02-$49.28 and intermediate support has been revised to $48.06-$48.33. All other levels will remain from the previous week.
Materials Sector ETF 1 Year Daily Chart
Transportation
Immediate support has been raised to $144.50 – $145.50. All other levels will remain from the previous week.
Transportation Sector ETF 1 Year Daily Chart
Retail
Immediate support has been raised to $83.80 – $84.44 and immediate resistance has been revised to $85.98 – $86.70. We are going to avoid the retail space for now.
Retail Sector ETF 1 Year Daily Chart
Utilities
Immediate support has been raised to $42.61 – $42.84. Additional guidance has bee identified at $44.65. Keep an eye out on this sector, as continued outperformance in utilities relative to the broad market is a sign of investor nervousness. All other levels will remain from the previous week.
Utilities Sector ETF 1 Year Daily Chart
Health Care
Immediate support has been raised to $59.30 – $59.82. All other levels will remain from the previous week.
Health Care Sector ETF 1 Year Daily Chart
Technology
Immediate support has been raised to $37.64 – $37.91. All other levels will remain from the previous week.
Technology Sector ETF 1 Year Daily Chart
Consumer Discretionary
Immediate support has been raised to $65.52 – $65.91. All other levels will remain from the previous week.
Consumer Discretionary Sector ETF 1 Year Daily Chart
Energy
Immediate support has been raised to $95.07 – $95.74. All other levels will remain from the previous week.
Energy Sector ETF 1 Year Daily Chart
World Markets
India
Immediate support has been raised to $67.72 – $68.67 and additional guidance has been identified at $72.78 and $74.70.
India Sector ETF 1 Year Daily Chart
Germany
Immediate support has been raised to $31.87 – $32.02 and additional guidance has been identified at $33.51 and $34.53.
Germany Sector ETF 1 Year Daily Chart
Japan
As the Japanese market has been in correction mode the past number of weeks, we are preparing for a new attempt at crossing the $12.04 – $12.14, level. Actually, we will be looking for a short at that resistance.
Japan Sector ETF 1 Year Daily Chart
China
All levels are being respected and will not require maintenance going into the new week.
China Sector ETF 1 Year Daily Chart
Brazil
Our support level was inaccurate for this index. As such, we missed the pivot and opportunity. We have revised the level going into the new week. It has been identified between $46.65 – $47.07. All other levels will remain going into the new week.
Brazil Sector ETF 1 Year Daily Chart
Russia
All levels are being respected and will not require maintenance going into the new week.
Russia Sector ETF 1 Year Daily Chart
Summary
I think you can already guess what will be said. Just wait. The equities have been over extended and you don’t need to use an indicator to see that. There is no point to chase the market. You can look for intraday movements. From our perspective the reward to risk ratio is not attractive at these levels.
There are opportunities within the currency and energy commodity space. AS mentioned above, the short Sterling and long Dollar is looking good. Look for Yen to continue lower to provide confirmation. Should the immediate support level in crude hold, then, there is a decent run to $105.11.
Have a great week!