Browsing Category: "Investment management"
In my weekly updates of major worlds markets, one of the charts includes an overlay of the amazing bubble in the Shanghai Composite Index. In this commentary we’ll build an overlay of four major bubbles across market history to see the variety of shapes a bubble can take. But first let’s take a long view of the index.
The next chart centers the Shanghai Composite. The peak is the center of a 3000-market day timeline. Markets are open approximately 250 days per year, so this is a snapshot of a little over eight-and-a-half years with plenty of room left to track the future behavior. The dramatic rise took place over about one year with a dramatic collapse of about the same duration. The symmetry of this these two years is astonishing and, as we’ll see, not necessarily characteristic of bubbles.
Jeffrey Strain
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It has more to do with your attitude toward money.
Just think of those who don’t fit the filthy-rich stereotype. People like Warren Buffett.
As explained in the book The Millionaire Next Door by Thomas J. Stanley and William D. Danko, personal finance has as much to do with people’s traits as it does with money. Many millionaires, in fact, have frugal ways.
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GOLD LONG TERM Gold remains within a long term up trending channel. It is, however, near the upper resistance line and one might expect a reaction towards the lower line about now. Having said that, there is not much more negatives from the long term perspective. All is roses at this point. Gold remains well above its positive sloping long term moving average and the momentum indicator remains well inside its positive zone. Looking at a daily long term chart the momentum indicator is turning lower and has crossed below it trigger line but the trigger is still sloping upwards. The indicator is pushing very slightly into new higher ground but just slightly below it previous high in late 2008. The difference is not enough to justify any negative divergence view. The volume indicator, on a weekly basis, is heading into new all time high territory. On a daily basis it is also at new high levels but one can discern a possible topping activity in this indicator. Still, when all is put together we continue to have a BULLISH rating for the long term. INTERMEDIATE TERM In the past few months gold has touched its intermediate term moving average line and bounced right back to the up side. It remains well above the line on the Friday close but a couple of volatile negative days could just see gold dropping below the line. The intermediate term momentum indicator remains in its positive zone but the action over the past few weeks suggest a very labored upside move. The topping is quite evident here. The indicator is now well below its lowest level over the past couple of weeks and heading down aggressively. It has moved below its trigger line and the trigger has turned to the down side. Still, it is some distance from dropping into its negative zone. As for the volume indicator, it remains above its positive sloping trigger line but in a topping trend. For the intermediate term the rating remains BULLISH but with more risk of turning negative than the long term. This rating is confirmed by the short term moving average line remaining above the intermediate term line. SHORT TERM Looking at the short term chart the indicators are literally screaming “topping”. Both the short term momentum and the more aggressive Stochastic Oscillator (SO) are now in their negative zones and seem to be heading even lower. The question now is not if gold is in a topping mode but how long it will stay there and how low will it go. Although I often do try to guess how far a trend will go I am more of a follower determining where we are now and what is the present direction of the trend. In the end I fall back on the tried and true technical concept that “a trend in motion remains in motion until a reversal has been verified”. So, where are we now as far as the short term perspective is concerned? Gold has just closed below its short term moving average line and the line has turned to the down side. Gold is now at its lowest price in two weeks. As mentioned, the short term momentum indicator has now moved into its negative zone and is below its negative sloping trigger line. It did give us a short term negative divergence warning and has been making lower lows and lower highs for the past two weeks. As for the daily volume action, that has been pretty light over the past couple of weeks and remains below its 15 day average volume line. Volume action is a tricky thing to try and assess. Too often it is not acting as the text books say it should act. I have found the volume action too often contrary to what one would expect. As an example, low volume action of down price moves is NOT necessarily bullish or bearish. It is just what one would expect from the actions of the masses who halt their activities during down days. Increased volume on up days is also not necessarily bullish. The masses just normally increase their activities when they see prices moving higher. They are afraid of missing out on the move. If one can determine what the NORMAL volume is on these up and down days then one can decide if the actual volume is increasing above the norm and is bullish or bearish. This norm is almost impossible to determine as it changes with time so to try and assess what the low volume action is telling us is next to impossible. How is that for a cop-out in not assessing the import of volume action? Anyway, getting back to the indicators, they all are telling us that the short term rating is now BEARISH. However, the very short term moving average line has not quite crossed below the short term line so confirmation of this bear must wait another day. SILVER I have just returned from two weeks on the move (some call it a vacation but it just seems like you work harder during a vacation trying to relax than you do during normal days). Today, I am a little behind time so I will cut the rest of the commentary short and return with a full commentary next week. Silver has been under performing relative to gold ever since the plunge. Although the long term rating is still BULLISH both the intermediate and short term ratings are BEARISH. Just a personal view but it does look like silver will continue to under perform gold for some time still. It has over performed for some time so this may just be a getting even trend. PRECIOUS METAL STOCKS Gold declined 0.9% during the week but the stocks tumbled by 5% or more. Silver was up on the week but both silver Indices were lower, the Spec-Silver was down 7.5%. This disconnect between the performance of the commodity versus the performance of the stocks is not unusual. In fact I would say that one should consider such deviation as normal, on the up side as well as the down side. One point to keep in mind, it is not unusual for the stocks to be LEADING indicators as to where the commodity is heading in the future, so traders in gold and silver should be very cautious when trading on the up side. One would be taking an extra amount of risk if one were trading in stocks on the up side at this time. It’s just not that bullish of an environment. Better to wait for things to turn around before jumping into the market, unless one is a short sell trader. By Merv Burak, CMT
(RussiaToday) – America’s credit rating is at risk, the unemployment is up and the residential real estate market has double dipped. Is it time to change the way the world economy works? “We are heading for a huge disaster,” says Euro Pacific Capital President Peter Schiff. As the US dips from a recession to a depression, Schiff says, America needs to stop borrowing money if they want to prevent driving off the proverbial cliff.
At the start of last week, I showed the “Arc Pattern” trendline boundaries that were forming at the peak of the intraday arc in gold prices, and this week, the arc continues right on schedule. Let’s take a look at the updated/current “Arc” pattern and then see where that structure takes us on the daily support chart. As I noted last week, the upper boundary was roughly $ 1,550 while the lower boundary was $ 1,525. Price continued to respect these boundaries appropriately, giving intraday traders quick opportunities to play ’scalp’ moves off these developing trendline boundaries. Not much has changed, as the boundaries now have defined themselves clearer this week to $ 1,545 and $ 1,525/$ 1,530 as seen above. The analysis is the same – as long as price continues to respect (bounce between) these levels, then you have your “roadmap” or game-plan for intraday/short-term trading opportunities. Should price break firmly through either of these boundaries, then it would suggest pattern completion and a breakout/impulse phase would emerge, allowing for Breakout trading strategies. I had a fun post last Wednesday – “Wednesday with Wyckoff” – regarding basic breakout trading tactics. So that’s the intraday structure – the “Arc” – but let’s take a look of where that leaves us currently on the Daily Chart: Before discussing current levels, I wanted to show the example of the prior “Arc” pattern from February into early March 2011. Though the ‘rally’ phase was longer than present, daily (and intraday) gold prices formed a similar arc with negative divergences inside the pattern (as we have now). The downside action continued, culminating in a strong sell-off bar that slammed the rising 50 day EMA at the confluence of the $ 1,400 “Round Number” support zone. The test of the confluence support ended the retracement phase, and price quickly broke the upper ‘arc’ trendline, triggering a breakout buy signal that preceded the April rally. And now to the present – we have a well-defined arc that is now coming into the support at the rising 20d EMA at $ 1,530. It’s possible buyers enter here to support prices at the 20 EMA, but if they fail to do so, expect a similar retest (deeper retracement) of the rising 50d EMA as what took place in March. It would then be up to buyers again to try for a retracement buy at the confluence of the 50d EMA and the $ 1,500 “Round Number” support (strange how structure aligns like that again). In other words, watch the current price at $ 1,520 and if there’s no rally here, then expect the ’rounding arc’ to continue, leading to another retest of the rising 50d EMA. Watch what happens at the 50d EMA at $ 1,500 for clues as to what to expect from there. Continue watching gold on the hourly/intraday timeframe with regard to this arc formation and trade appropriately (don’t get ahead of the arc!). Corey Rosenbloom, CMT
