The Canadian Technician

A Timely Look At The Miners

2013-05-17T00:09:45-04:00

I can't help wonder if the miners will finally get a bid here.

Gold has started some major rallies in May before. Currently it just feels so unloved, especially with the US dollar soaring higher every day. I see no reason to jump on a bull trade in $Gold which is a great reason to be aware! Maybe if it tests the April low and can make a double bottom bounce? It seems a stretch at best. Here are the major global miners.

You can see the trend in the miners has followed the $SSEC pretty close.

I also put CAT on this chart as it recently shot up $10 a share. Everything is playing with the 10 week line. Will it prove to be resistance or the chance to get onboard at a nice level? I think some signals out of the $SSEC and the $USD will be the ultimate clues. The miners still look weak when they all hook down on the last reading.

Stay tuned for a breakout or be wary of a continued push down. That 10 week line can be an important area. May has been a month where Gold makes a low. While I definitely don't expect one, it is probably just when we should! However, 2011 showed that the commodity erosion was just getting started in May.

Good Trading,

Greg Schnell, CMT

Energy Markets React to $USD Strength

2013-05-14T13:31:24-04:00

This is the picture of how the energy markets have performed over the last 6 days.
You will notice the date in the top left corner. This chart included the Monday May 13th close.

The $USD recently went on a tear over the last few days.

Look at the same chart with a date almost a week ago. This was as of May 8.

These markets moved significantly when the $USD currency pairs broke out on the charts. I do not see a linkage between the Solar ETF and the currency.

If you open a month of data, the $USD trended in a range and the commodities worked slightly higher. But when some major support areas on the Aussie and the Yen broke, these commodities really moved.

Its not a daily correlation, but these commodities pushed down hard when the $USD made sudden moves higher.

Good Trading,

Greg Schnell, CMT

Currencies - Wild Volatility In More Than The Yen

2013-05-10T11:21:40-04:00

This chart of the currencies that make up the $USD has been shown before. I have not reset the trendlines since publishing the chart in April. But look what is happening relative to the trendlines.

You can see the Yen lost support at 100 where it had rallied from multiple times in April. That level has been lost. We'll see if it regains its momentum.

The British Pound continues to gap above and below the 154 level. Today its back below. This chart will be interesting to watch at the green trendline. Will it get support or fall through it? You can also see on the far left the market bounced off the 153 level so this is an important support point on the chart. It is also testing the bottom of the uptrend since March.

The Canadian Dollar rallied up to parity (100) and is now turning down again. Comparing this with the Aussie chart lower will be important for commodity clues. Will it follow the Aussie lower or will it get support at the green trendline? There are a lot of interesting points on this chart. Currently it is making higher highs and higher lows.

The blue trendline on the Aussie ended up being particularly important. It fell below and backtested back up to it. It made a sideways trading range marked by the green lines. It avalanched yesterday through the 9 month support level and gapped lower today..

The Swissie also rallied off the March low and tried to turn up. Today it has resumed its test of the large head/shoulder pattern. This green line looks to be in jeopardy and is an important currency to watch. The Swiss 10 year bond is extremely low in yield compared to the US so money seems destined to flow towards the USD.

The Euro appears to be a couple of weeks behind the Swiss as it is still up near the highs of the right shoulder. Today it moved below the support of late April. Will it continue to move towards the neckline? The rapid action has taken 2 cents off the Euro in the last 2 days.

The Swedish Krona completed the Head/shoulders pattern in April but continued to fight back and forth across the 152 level. The move down today has fallen below again. The gap was also resistance in the rallies.

Lets look at the wider view again. Stunningly interesting places on the long term charts.

These currency moves continue to be big as they move across major technical levels. Currencies affect bond flows, commodity prices and equity prices as we have seen in Japan.

Good trading,

Greg Schnell, CMT.

Crude and the Russell Correlation

2013-05-01T12:13:07-04:00

Crude has been leading the Russell lately.

This high correlation is very important if crude starts to let go.

Good Trading,

Greg Schnell, CMT

Bears For Breakfast - When The Bulls Run

2013-04-27T13:26:44-04:00

One of the greatest feats of technical analysis is not its simple execution of reading a single chart. That is the basic building block. The real beauty of Technical Analysis is reading hundreds of charts and building a story that meshes together across them. In blogs, this art is difficult as you get a few pieces in each blog but not a great macro story.

Recently I blogged about the equity markets on a short term 60 minute basis. Occasionally I go on about the macro markets on a monthly basis. Before that was the symmetry across the currencies. Before that was the symmetry across the commodities. So while I try to add them all together to make a distinctive story, the reader may not be able to parse them together in a panorama like my mind is constantly working at.

So let me summarize my main thesis as taught by John Murphy and Martin Pring in their intermarket analysis work. Some of their teachings along with my own learnings make up the following paragraph.

Long bull markets in equities are global. Bear markets are also global. Trends in commodity industries filter across the globe. Trends in bond markets filter across the globe. Trends in currencies filter across the globe. While we can have a brief rest from the global view, eventually either the world starts doing better or everything starts to slow down. If you agree with that then lets review a few things.

1) The BRIC countries have weak equity charts.

2) The commodity prices are all snapping major 4 year trendlines. Is Oil next?

3) The commodity countries made their equities highs in 2011.

4) The US currency looks like it is about to break up and out of a 4 year downtrend. This is bearish for commodities.

5) The US market continues to outperform the world in stock market equity performance.

6) Recently Japan has surged onto the scene. This wouldn't be the first attempt by Japan to break out of the demographic headwind they have in their country.

7) Timing is everything. Not only do you have to have the direction right, but you need to have the timing right.

So lets review the story so far. In late November, it appeared as though everything was breaking out into a new bull market globally. I used the title the new bull market on 12/12/2012. In February, the global trend started to soften. We saw the large miners fall 30 and 40% off the highs. We continued to see gold weaken. Copper broke a trend line almost 8 weeks ago. The Elder candles have been red for 12 weeks. This week saw a 1% bounce up from 12 weeks of selling.

So here is the 30 year view of the $USD.

The $USD has not broken out yet. The recent move in $COPPER to the downside, instead of breaking to the upside in 2013 is a huge concern. This does not bode well for global growth. The pennant formation on the $COPPER chart of 2012 was saying indecision. Now, after 12 weeks of decisive direction (selling )we get a bounce. Copper is a great indicator. Things can deviate for a while, including copper, but this has been unabated. I am sure even the copper market has heard about the new US housing boom, but it hasn't dented the selling of Copper at lower levels every week.

The macro view to me, is that commodities in general are going to continue taking a big gigantic pullback if, I repeat IF, this line breaks on the $USD. You can see the broad commodity market dropped 20% in two years while the world loved internet darlings back in 1997.

Let me switch to bonds. The Swiss 10 year bond sells at .6% interest. The US is slightly above 1.5%. If you were a foreigner looking to invest money, you would make more than double in a US 10 Year than a Swiss 10 year.As money moves to safety in America, the investor may also get currency appreciation if their home currency falls. This really helps the return. These bond yields are near the lows we have seen in them, but Japan dropped to .6% multiple times on their 10 year bond. Can the US go there? Nobody thinks so, but that doesn't mean it won't happen. So investors could continue to buy US treasuries rather than Swiss. This would suggest investors want to remain in a safety trade, not risk on.

Globally, the broader equity markets are getting weaker. Canada, Brazil and Russia look terrible. Australia looks a little better. If we switch to currencies, the currency chart of Australia broke the blue trendline back in February and is now testing the green line. $XAD on this chart below.

A breakdown in the Aussie Dollar and the Canadian Dollar would probably confirm a $USD breakout.

Let me get back to equity markets. So with the global central banks all injecting QE into the world when we were at a market top back in September, it seemed odd. Funnily enough, the market (collective brains of investors) reacted the same way (thought it was odd) and sold off until the November low. Now, after the seasonal rally, we continue to shoot for the moon. Everybody is bullish, because every Central Banker in the world is doing more and more QE. But the charts don't agree. The US and Japan charts look good. Most of the European charts made four month lows during April and then rallied when broad economic indicators for Europe were worse than expected. Somebody made money as everyone wanted to get short on the news. Now that the short squeeze is over, we'll see how they continue to perform.

The day to day swings mentally wear out retail traders. Continually looking at the big picture can help us see some things.

To review, Bond prices are rallying which means investors are seeking safety again. Money is moving to the $USD and it has not broken out yet, but we should be ready if this is going to happen. Global equity markets look weaker than America and the commodity countries are breaking down, with the exception of Australia, which made three month lows but has since rallied back up. It is in line with the market close of February. The Commodities are suggesting down not up.

Let me digress. I have never bought Ned Davis Research but I am aware he is an outstanding technician of the markets. He recently did an interview. I wholeheartedly support his analysis style based on listening in and until I listened to the interview this morning, I did not know that I had so many beliefs in common with him. The first half of the interview warms him up, and the last half gets into nuggets of wisdom earned over 40 years. If you have not heard it, I would strongly recommend an hour spent listening to Ned who rarely does interviews. Ned Davis.

Lastly, I received a great chart this morning from Dominick Graziano. He always presents me with great gold charts to look at. This is straight from Dominicks work.

So this chart represents the price of gold compared to the 'miners of gold' stocks. Usually the stocks outperform the metal in a bull trend for both. Currently, the metal is outperforming the miners which is bearish. When the miners finally start to outperform the metal, it will probably represent a long term change in the trend back to the bull side. Great Work Dominick!

There are pivot points in time and the central banks are doing everything to keep inflationary forces alive. This is one of those points in time. As everyone is firmly aware, only 40% of US companies reporting have beat revenue expectations by the street analysts. That is not compared to year ago, that is just compared to current analyst expectations. There is a lot of share buybacks that are improving the earnings per share numbers even if the companies are just standing still. I continue to believe in the confluence of all of these charts. Should the world fix itself and get going, I'll be happy to join the bull parade. Currently, it looks like Goldilocks is serving the three bears in the room breakfast. Stay sharp, the next month may magically reverse all of the trends or just the US trend.

So I don't see the global collaborative bull market setting up yet. I see Bonds and commodities as headwinds. I see the global investment community seeking safety in America, but declining revenues in equities will be difficult to hold for 'safety'. Slower sales globally eventually means lower profits. Maybe not lower in earnings per share terms if you reduce the number of shares, but that is another story. I am now expecting a seasonal pullback into June and we'll see what happens next. My USA indicators are teetering on levels they normally break down from. The Bullish Percent indexes are holding just above breakdown levels, eg. ($BPNDX is still above 70%),where other charts (crossovers) have already been surpassed into the market pullback zone. When it does pullback from these levels, most participants are surprised how far. Things just need a little more time to get into sync for a new bull market in my opinion.

Don't forget to listen to Ned's rare April 18th interview! Ned Davis at NDR.COM

Lastly, feel free to shoot a note back if I wrote anything confusing or even if you agree or don't agree. That is what makes a market. Always nice to hear back.

Good Trading,

Greg Schnell, CMT.

A 60 Minute View Of The Different Averages

2013-04-25T15:06:27-04:00

Sometimes, the market can mask internal weakness and all of a sudden it lets go. Today, the charts are are at an interesting location relative to themselves and the others.

First of all, here is the chart.

So I have placed the indexes in order of strongest to weakest based on the 60 minute chart.

So the chart is $TRAN but everything else was stronger so $TRAN ended up on the bottom.

The $COMPQ is trying to take out old highs and has been here for about 6 hours now.

The $SPX is a little weaker. It is testing the support level right under the highs of the market back on April 11.

The $INDU is weaker still and is just trying to stay above the last two rally attempts. Not really as close to the previous high. Roughly 100 points away.

The $RUT is starting to make wider and wider swings with lower highs and lower lows. That trend is being tested right now.

Lastly, the $TRAN has lower highs and lower lows like the $RUT. The last low took longer to base and was slightly higher than the previous low.

What does this mean? Well, the trend is weakening as these start to wobble. Obviously some sectors are stronger than others. If the rotation can occur to move into the industrial and material sectors, we have a good shot at going higher. Stocks like Ford and Magna are trying to break out from recent resistance. We are at an interesting inflection point. We'll see where we go from here.

Good Trading,

Greg Schnell, CMT.

One Of My Fear Gauges Continues To Show More Pain

2013-04-23T13:26:12-04:00

This is the chart of three month T-Bills. When investors are looking for short term safety, they go here.

As they buy, it pushes the yield down. You can see .5 has been an interesting level. This week we have moved below it in almost a straight line down for the past 8 weeks.

I would encourage you to click on the chart and see the large scale. It is my notepad that I write macro ideas on. Some of them never become a problem, like the free parking during the fiscal cliff discussions. But we've headed lower for 8 weeks now after a failed breakout at 1.20. Usually below this level is very concerning.

You can see the Full Sto's have retraced back below 50. The T-Bill /notes / bond markets are twitchy here.

Good Trading,

Greg Schnell, CMT.

Currency Charts Are Falling Into Alignment For A Big Move

2013-04-22T18:21:21-04:00

There is a remarkable amount of confluence on the currency charts right now. To a new investor, there might not be much there. But for technical pattern traders, this is literally lining up to be a blockbuster May.

I want to show a pair of charts I showed once before. They have all reset to a very interesting place on the charts.. Let's start with the last year, then we'll zoom out to the big picture. I'll comment on each price plot below.

We are moving through the charts in their proximity to breaking the lower trendlines.

You can see when Japan broke the trendline in early October, it created an massive move lower.

When the British Pound broke, it was another critical move that created a significant downward spike.

You'll notice it made its tops on May 1, September 14 and retested at the end of December. The first date matched the date where the $SPX retested the April high. The second was the Fed QE Infinity. The third high was just the opposite. It was the day the market made the Dec 31st low and has moved down since then.

You can see the British Pound, the Canadian Dollar, and the Aussie Dollar all broke the blue trendline within a few days of each other. This symmetry is important as we view the current setup.

The Canadian Dollar has followed the pound in a downward channel, topping last September on the start of the infinite QE program. We have weakened ever since. We didn't even retest the high like the British pound did. You'll notice a small head/shoulders top in Aug, Sep, October. We broke the neckline at 101.50. We would expect to see a backtest after breaking down. All of the top three charts did not even have the energy to do that. You'll notice the Canadian dollar failed on a retest of the December high, and then fell through the blue trendline with a downward gap to start the move.

I like to look for a retest at three places. The previous high, a backtest of the neckline, or at the neckline breakdown price level. Sometimes, synergies will emerge at a point that is common amongst 2 or 3 of those typical locations.

The Aussie dollar has been in a sideways channel. It looks stronger than the Canadian dollar. On this last pullback it started with a large 1 cent gap. I would suggest a firm test of 101.75 is coming soon. You will also see that the price tested back to the blue trendline which just happened to coincide with the two previous tops.

The Swiss Franc has been building a head and shoulders (H/S) pattern. After breaking through the blue trendline, it went back up and retested it. This looks like a right shoulder to me. You can see this 107 level was support before. If it fails to hold, I would expect a quick trip to the green neckline of the head shoulders pattern.

The Euro is the big one. It makes up 56% of the dollar index. After breaking through the upsloping trendline, it made a retracement move back up almost to the breakdown point. Usually when right shoulders get weak, the price falls quite quickly. Notice the symmetry of the H/S pattern so far. The right shoulder is currently the same price as the left.

Finally, the Swedish Krona was making a high on the same day as the start of QE Infinity. After rallying higher, it fell below the blue trendline in March and rallied back up for a retest of the line. This retest was when the $SPX rallied to a new all time high as well. But the $SPX was only able to hold the breakout for 3 days. That appears to be about how long the Krona lasted too. After failing to hold above the blue trendline again, it gapped lower. Now it is testing neckline support. If support doesn't hold, it looks like another 6 cents lower for the currency. It might even confirm a topping $SPX if that was to happen.

To summarize this chart, 6 of 7 charts look likely to test the lower trendlines in the next 2 weeks. The british pound has had a countertrend flag building. It looks like it is up against the downward trendline. The Canadian and Aussie charts look like they'll test the March lows. The last three charts all have a head/shoulders pattern that looks vulnerable.

Obviously the $USD is important here. It's always important. Why don't I think all these charts can go higher instead? Just that all the patterns seem to point lower. The H/S are topping versions not basing patterns. The 7 charts have broke shorter term blue trendlines which would suggest a new trend underway in a big way. That is the $USD going higher trend. Lets look at the long view again.

The Yen looks like a waterfall. No Comment. I think the trend in down.LOL. Eventually it gets a bounce. Notice the 4 year trendline was holding the major price action. The break of the green H/S neckline was almost irrelevant. It just kept going.

The British Pound is a great example of the long term pennant, breaking to the downside. You'll notice the right side of the british pound pennant is very similar to the recent look of the Aussie dollar. From October 2011 to January 2013 was a nice sideways channel. Notice the british pound gapped lower after breaking the green trendline. It didn't wait for the horizontal support line. I think this is important for the Aussie Dollar which I'll cover below. ($WTIC is currently testing the low side of a four year pennant).

The Canadian Dollar is my home currency so I stare at that one a lot. After seeing $COPPER, $GOLD, $JPY, and $XBP all break 4 year trendlines, I am expecting the rest of these to break as well. The $TSX broke a 10 year trendline vs. the $SPX, and $CRB broke a 10 year trendline vs. the $SPX last year. How many clues do I get? So, any more weakness in the Loonie will make my expectations fall like a toonie in a Coke Machine.

The Australian Dollar feels as vulnerable as the British Pound did in January. It is just above the 4 year trend line. The failed breakout leads me to believe lower is the direction.

The Swiss Franc is harder to read on the big picture. After gapping below the blue trend line, I get worried. But it is still above Horizontal support and rising lows. We are narrowing in on the final 5 price points between 105-110. One to watch for sure. An argument could definitely be made for a head and shoulders bottom with Jan 12/ July 12 / Mar 13.

I don't see the Euro going higher. Everyday they downgrade the economy of some country. Lately the $DAX chart has been weaker too. But we'll watch the charts to see. I think this large H/S pattern is just completing the right side and down it goes. This could be the trigger that breaks all the other charts if it does.

The Swedish Krona just broke the big uptrend and gapped down as reviewed on the shorter term. It has a 4 year Head/Shoulders top that stretches wider than the $JPY chart above but looks similar. It also has the giant 5 year pennant. The upside is a 40% for me, the 60% is to the downside based on the direction of the other charts.

Lastly, the $USD tested the 4 year trendline. It pulled back and now it is knocking on the door again. With commodities getting crushed, it feels like they see the $USD surging higher and the trend is just starting. The currency bulls will say the failed breakout on the $USD a few months ago is the clue that the USD is topping out.

I am definitely leaning with the directions recently given. From Copper, Tin, Aluminum, Zinc, and even Gold and Silver, the metals look to be creating a giant banner saying watch out below. Crude is already testing the low side of the 5 year pennant and usually the lows are in June or July, not now.

I think the next tale will be told by the currencies. Following them should help us stay on the right side of the summer trade. Remember how a lot of the currencies started to fall as the $SPX topped out. That might also help be a broader clue.

Lastly, Stockcharts is in California with StockCharts University this weekend. Check the other classes in Seattle and Toronto coming up sooner than you think. You can find that information here. SCU Seminars

Good Trading,

Greg Schnell, CMT

Commodities Shaken Not Stirred. Any Olives? Olive Branches?

2013-04-15T22:55:47-04:00

I think even James Bond might have been rattled by the moves in commodities today.

Margin calls rolled across Silver and Gold. Natgas , Silver and Gold all had changes in margin requirements announced by the CME. Copper made new one year lows, but closed above the level.

The precious metal companies were crushed. The NUGT 3X ETF lost 50% in a few days. The miners were taken to the boiler room. TCK/B.TO made 4 year lows today but managed to close above the previous lows. $TSX looked like a tornado hit it, as it swirled down continuously into the close. We would have to say wow! If there was a silver, concrete lining, it closed above 12000. Lets plow through some charts.

You can see the substantial breakdown that occurred and how pivotal the Friday close was.

Silver

Oil

I want to show oil in another view. It is extremely important that this holds, I just don't believe it can after seeing the commodites and the indexes wash out like they did today.

$WTIC now trades below both the 10 WMA and the 40 WMA. It has broken the rising trendline. But it came to rest on the single most significant trendline in the commodities book for me.

If this trendline fails to hold, I would suggest the $TSX could lose another 750 points in short order from here as oil falls down to lower levels. These long trend lines are very important. $WTIC may pause at horizontal support around $85 and if that can't hold, I would expect a quick visit to $77. Then the hand wringing will be in earnest as it was for Gold these last 3 trading sessions. A major violation of support at $76 would really knock the oil stocks into serious long term chart break downs. We won't worry about that yet, we'll keep watching where the price finds support. The blue vertical lines are placed at April as oil usually takes a breather from there into July. You'll notice the other trendline break in 2012 was near the end of the weak seasonality, not the start like now. So that worries me a bounce.

Lastly, my olive branch.

Check out this weekly chart of Teck Resources.

You can see the low into the top right of the chart title was $25.02. That marked a major 4 year trendline break. But there was a strong bounce into the close that pushed it back above the previous low of $26.02. That's the good news. The bad news is it has to stay up here all week so we don't make a lower close! It has to get up into the $27's to not really show weakness relative to the previous closes.

Lastly, I'll close with $Copper. It was my Olive branch today. Why? Look at the candle for the day.

So why is this good? Well, After breaking below the previous support of $3.24 (not shown), it went down and then closed well off the lows at least in the middle of the candle. Somebody came in and started buying. Look at the volume on this. Double what you see in the last four months while copper was weak. It has all the makings of a great capitulation day. Let's watch and see if it can rally from here. It is swimming against massive global tides. The indexes in many countries are in trouble technically on the charts as I have been blogging about for weeks. The other commodities are losing (have lost) support. Can this be a place to buy the miners, if only for a bounce? It might be worth watching. The MACD currently is at a slightly higher low..OK. Enough hoping. I'll be watching if the group can get support generally or does this pull the equity markets down in a spring lull.

Mr. Bond, would you like an olive?

Good Trading,

Greg Schnell, CMT

PS. Hopefully you have noticed all the cities the new training courses are being held at. The students who have come, love them. We are offering an advanced level that may interest some of you.

Here is the link. SCU

Dr. COPPER - A Really Big Deal Today

2013-04-15T10:17:02-04:00

$Copper charts are updated on an EOD basis. EOD means End Of Day in the chart title.

The live trading of Copper this morning is $3.23

That line is very important on the long term chart for copper.

So Copper is testing last years lows at $3.24 this morning. I don't have a real time price for copper but I saw it trade down to $3.23 on the BNN ticker this morning. Previously, we were talking about copper breaking a trendline support off the rising lows. Now we are testing the horizontal level. We'll watch for the close, but it made new 1 year lows intraday.

As you can see, that is a big support level that must hold.

Good Trading,

Greg Schnell, CMT