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Although the markets have come a long way from their mid-summer lows and remain in an extended state, having yet to experience any meaningful pullback in price thus far, Mr. Market seems content with the “lay of the land” for now, consolidating via time as opposed to price, while both investors and traders alike, anxiously await further cards from the deck, perhaps revealing its next course of action with respect to direction. For the past couple of weeks, the tape has grinded in a sideways pattern with a slight positive tone despite mixed economic reports, as well as a change in guard in Washington, where the Dems recaptured both houses of Congress and Defense Secretary Rumsfeld has called it a day. While many may have perceived such alterations as a potential detriment to the financial markets, we’ve yet to witness any indications of such thus far, where we may just be treated to more of the same in the forthcoming days and weeks ahead, as the masses attempt to decipher and digest the developments. In any event, from a technical perspective, not much has changed during the past several weeks, where the broader indices remain comfortably perched above their all important 50 and 200-day moving averages. Furthermore, new 52 week highs continue to far outpace new 52 week lows, which is encouraging as well. Additionally, markets around the globe in Europe, South America and Asia continue to press into higher ground (although Japan appears to be lagging), further re-enforcing the positive spirits throughout. So, while all appears relatively calm, with no foul and no harm done, at least thus far, there are a few areas which we continue to monitor with a close eye. With that said, we present the charts of the Semiconductor index (SOX); DJ Transports; US Dollar; Gold; Silver; Oil, as well as the VIX below. While it’s certainly premature to come to any definitive conclusions with respect to the action, as all seem to be biding their time, should “speed bumps” arise in the near future, it’s more than likely that one or more of the above may, and we emphasize “may”, be the culprit.
The Semi’s continue to lag and trade in a range bound fashion (indecision), pinched between their 50 and 200 day moving averages. A break above its 200 day and perhaps more importantly the 480 level, would certainly bode well. On the flipside, a breach of the 440-45 zone may usher in further selling pressure.
The Trannies have responded off of their August/September lows and trade above both their 50 and 200-day averages. Although the picture is much brighter than a couple of months ago, the index has yet to join its brethren DOW in surpassing its May highs, thus the continued “Dow Theory” non-confirmation.
Evidenced by the chart above, the US Dollar continues to languish. A break of 84.50 may set the stage for a re-test of the yearly lows and more importantly the 80 level. Should such occur, the potential ramifications could be severe. A close above its 200 day MA and more importantly the 87.50 zone, would certainly turn the tide. We await the verdict.
Above, we bring your attention to the 3-Year weekly chart of Gold. While many have thrown in the towel during the past six-month’s consolidation, the secular bull trend remains clearly in tact. What’s all the fuss about?
Ditto for Silver, which is actually outperforming Gold at the moment, where we continue to feel as though explosive gains lie ahead.
Crude has pulled back from its mid-summer highs ($80) and as a result, has certainly provided a wind at the back of the equities markets along with 10-Year Treasury yields in the 4.5-4.75% range. While the intermediate and long-term trends have been interrupted, the jury remains in deliberations as Oil attempts to find its footing on the “slippery slope”. And finally, the chart of the VIX (sentiment indicator) below, continues to portray a picture of complacency, where the index now finds itself once again hovering at historic lows. It’s quite evident that market participants see no reason for downside insurance via put options, which in our eyes, remains disturbing.
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INFORMATION The opinions of FSU contributors do not necessarily reflect those of Financial Sense. |
