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Posts Tagged ‘chart pattern analysis’

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Treasuries Collapse On Caution Over Quantitative Easing Policies

In Market Analysis on October 15, 2010 at 8:16 pm

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Last week before the jobs report on Friday I wrote an article that concluded, “The weakness in the dollar will also put hawkish pressures on the Fed. Many are expecting more quantitative easing but the market may have a surprise if the Fed changes its language to support the dollar and curb the speculation into gold and silver.” (See Will Tomorrow’s Job Report Be Bullish for the Dollar?) Today, one week later, Ben Bernanke said, “…factors have dictated that the FOMC proceed with some caution in deciding whether to engage in further purchases of longer-term securities.”

This was a major change in the language and came in at a crucial time to support the US dollar from entering new all-time lows. Pressure from the rapidly declining dollar led Ben Bernanke to also speak today about not knowing the economic effects of these policies. This sent long-term treasuries lower along with housing and financials. The dollar gained some strength over the cautious statement.

I believe he’s well aware of the economic effects which are clearly being felt in the markets, a deteriorating dollar, higher prices of commodities, and an extremely weak recovery with high unemployment. Now I’m also seeing signs of a collapse in long-term Treasuries through two factors — less demand from foreign buyers and less purchasing power by the Fed. One of the actions the Fed has been doing to keep interest rates low to stimulate growth is buying long-term Treasuries. However, the market is nervous that the Fed may be cautious of the extent of those purchases.

Although Bernanke indicated there are some very large deflationary pressures, the long-term Treasuries are indicating that it will be much harder for the Fed to raise its debt at these low rates. The long-term Treasury market is indicating that the spending and deficits the US is getting itself into may demand higher interest rates. The US is selling a huge supply of Treasuries to finance the debt it’s using to spur economic growth. This is creating an artificial glut and demand seems to be decreasing — especially since many investors are moving into precious metals and natural resources as the safe haven at the moment. Long-term Treasuries were a safe-haven asset during the credit crisis of 2008 and the recent European sovereign debt crisis. However, the long-term Treasuries are showing signs of weakness as investors are losing faith in the financing of record deficits and a pullback of purchase by the Fed.

We may be approaching a significant decline in long-term Treasuries which could send long-term rates higher. These higher rates could continue to put pressure on the housing market. Many homeowners are unable to take advantage of record low interest rates to refinance due to negative equity. Now with higher rates this will continue to put pressure on the housing market and bank stocks which haven’t confirmed this recent rally in the equity. Please see Treasuries Break Long Term Trend Support as Gold, Silver Rush Continues where I discussed the potential breakdown of US Treasuries. Their recent lack of participation in the market rally indicates that the housing and financial crisis isn’t over yet. Defaults are expected to rise with higher interest rates on adjustable loans.


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I believe that interest rates will start moving higher and we may see a major collapse in Treasuries, housing, and financials over the next couple of weeks. The long-term Treasuries have broken trend support and the 50-day moving average is on high volume. Now is an important time to prepare for a rise in interest rates during a weak economy.

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Second Failure of 50 Day Moving Average, Possible Shorting Opportunity

In Market Analysis on June 21, 2010 at 6:31 pm

There are key points and days to consider heavily when following markets and deciding which direction to play.  If you study charts you are able to see patterns that repeat themselves over and over again.

One key shorting opportunity that I have seen before major market declines is the second failure of the 50 day moving average.  Today’s nasty reversal where it closed down after being up for most of the day fits this criteria especially when it coincides with the failure of the 50 day moving average.

The volume was above average and this leads me to once again be bearish on the market.  Now is the time to short or buy inverse etf’s such as REW or SH to protect against another decline.  It is not wise to be long this market.  Trailing stops should be monitored closely.  Now is the time to short not when the market reaches new lows.

Gold mining stocks will be monitored closely.

Stay tuned.

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Three Failed Attempts to Regain 200 Day Moving Average, Buyers Beware!

In Market Analysis on June 15, 2010 at 12:39 am

In baseball if you swing and miss three times then you are out.  On a chart if you see three failed attempts to break resistance…get out or short.

Each time the SP5oo tries to regain the 200 day moving average it fails and it is immediately hit with selling.  Sellers are in control and the market is still in correction mode.

Today Moody’s downgraded Greece’s debt which caused the market to give back early leads.  The chart shows a picture of a move up to the 200 day on low volume.  This means there is very little buying going on.  In order for me to gain confidence in the markets I need to see a break through major resistance levels with conviction and that moment is not apparent yet.

Quite contrary three failed attempts to regain major support has failed.  This causes me great concern because in a bull market the 200 day acts as support.  In this case it is acting as resistance, which is typical of bear markets..buyers beware!

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Is Gold In A Bubble? No Way! Classic Cup and Handle Pattern

In Market Analysis on June 11, 2010 at 1:13 pm

On the front page of all the media outlets is the question if gold is in a bubble.  I ride bubbles and look for beginning signs of bubbles.  Bubbles are irrational, but there is an old saying that markets are irrational a lot longer than one can stay solvent.

I believe gold is nowhere near a bubble top and believe now is the time to profit on the next major asset class ready to run through finding the strongest mining stocks in the sector.  I use relative strength to find those companies.

Gold is in a classic cup and handle pattern.  The cup and handle pattern has historically led to major market moves.

You can see by the graph the major breakout from the six month saucer on excellent volume.  Notice how the volume dries up on the handle.  Now I expect a major breakout and a run to $136 on GLD or $1375 an ounce.

Compared to other bubbles gold appears flat.

This a chart of the oil index verse the gold and silver index.  Notice the run in oil before the credit collapse.  This run lasted almost 5 years before it topped.  Meanwhile for the past 15 years the XAU has been relatively flat and yet it has had a nice run we have not seen the run up like other asset class bubbles.

I believe there are signs that we may be moving into a peak gold area and would not be surprised if there is a global rush to gold as investors lose faith in fiat currencies.

The recent collapse of the euro only preludes what will eventually happen with the dollar and treasuries.  Now many people have run from the Euro to dollars, but I believe that is temporary.   Now is the time, before the masses rush in, to buy gold and specifically the strongest mining shares which I highlight here.  This is not the time to be bottom fishing other markets.  I believe to stick to strength.   This chart above gives me the confidence to know that we have not entered bubble territory yet.