Market Murmurs
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Posted By:Gary Glover On:26/03/2012 09:08
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If my timing is correct this could be the week that sees the major support of the $34 region broken. It has been consolidating just above the previous swing low of $34.05.
With recent Chinese data showing the Chinese economy is starting to slow up and representatives for BHP and RIO both commenting in the last week that they feel demand is flattening for alot of commodities the sector could remain under pressure. Has the market already priced this in or has it had its blinkers on thinking the resources boom can continue on?
I think only in the last month that market strategists have begun to question this possibility, mainly on the back of improved US data which has bullish implications long term for the US dollar and US bond yields. Commodities don't normally run hand in hand with the $US dollar.
For BHP, normally if we bounce of a low we are going to break, an attempted rally for no more than two weeks can occur before eventually breaking it. Some sort of shakedown is possible too, where you see a sharp rally fail and break back hard. We haven't had this but we have and the attempted non bounce for two weeks off the low. It could be time.
Computershare and QBE Insurance are two companies that will benefit greatly fundamentally from a bullish move in US bond yields and I believe the sharp move up in recent weeks for these stocks illustrates that thinking. No need to chase these in this sort of sideways market but I would be looking to add these to any portfolios on any reasonable pullback.
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Daily Murmur
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Posted By:Gary Glover On:23/09/2011 16:24
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XJO
We have mentioned that Friday the 23rdof September would make a great low from a timing perspective. It would replicate previous other cycles and mark our first higher low. Attached is todays XJO set up and also we have attached in pdf, a document copy of 1998 low – a similar looking set up and one that has occurred a few times in the last 30 years. 17 trading days up (22 cal days) and 15 trading days down (45 cal day) low. These are very common set ups and timing tells me this could be a sharp V shaped low. Feels a bit scary to be buying here but thats how all good lows should feel. We have mirrored this move exactly in the same number of days. No one is expecting a sharp bounce from here, so that is always a good reason why it may come.
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Daily Murmur 25/08/11
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Posted By:Gary Glover On:25/08/2011 16:39
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Gold has been running hot for quite some time. I think this is one of the most crowded trades in the market so it is very vulnerable for a large correction in my opinion. I think most of the commodities have started to roll over so Gold was destined to follow. I believe this could be a terminal move and a larger deeper fall is likely, possibly similar to what happened to Silver recently. I noticed the monthly could develop a massive shooting star pattern which is extremely bearish longer term and for the short term gann traders, the recent high was exactly 144 days from the previous high.
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Daily Murmur 28/07/11
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Posted By:Gary Glover On:28/07/2011 08:45
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RIO has recently rallied 8 days up after following an impulsive move down that lasted only 4 days. This looks like some sort of consolidation and should move lower to retest the recent lows.
The low volume on the climb shows a lack of commitment from the buyers so we favour a move lower from here. A move above yesterday’s high of 83.33 would cause us to reassess our position.
Markets often trade 1:1 or 2:1 in terms of days up vs down, so 8 vs 4 is a common set up.
RIO - a strategy we looked at yesterday
An options trade to consider is a RIO Bear Put Spread
B RIO Sep 82.01P @ 2.22
S RIO Sep 76.01P @ 0.73 cost 1.49 / 6.00 spread
Max loss = 1.49
Max gain = 4.51 4:1 risk reward
B/even = 80.52
Max profit if RIO closes below 76.01 by September 29
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Daily Murmur 17/06/11
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Posted By:Gary Glover On:17/06/2011 10:17
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Although we covered this in the stockwatch video this week, I thought it pertinent to cover this stock again. These blow off type of trends (vertical markets) all end the same way, with a 90 day last gasp move. The last couple of days tells me time is up and also it has struggled to go to a new high the last two days which indicates it has run out of puff.
Once this breaks lower the first stop is the last swing low before the last drive which is $12.00 in this case. I think you will surprised at how fast these things normally fall after these moves complete. I am expecting a fast move down from here.
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Daily Murmur 06/06/11
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Posted By:Gary Glover On:06/06/2011 14:31
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Lynas looks to be in trouble here. The bearish consolidation recently shows that the market is struggling to trade higher and the spike in volume last week shows that the sellers are very keen at these levels. The daily charts shows a break of the trend also so it should trade back towards the $1.70 region. This is often referred as a flag or pennant technical formation.
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Daily Murmur 18/05/11
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Posted By:Gary Glover On:19/05/2011 09:53
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Over the years I have noticed that speed lines can be very useful in finding support zones after a large trading range has been set. The theory suggests that once they break the lines they will likely go to the next line before finding support and bouncing higher again. On declines they can trade along these lines before breaking lower, so we could see BHP hold the current levels for a while in the short term. Once we break this line then $39.00 will be the next support zone but in the short term it could hover above this line for sometime first.
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Daily Murmur 12/05/11
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Posted By:Gary Glover On:12/05/2011 08:18
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I'm not the fun police
Resource stocks have provided investors some great returns over the last couple of years and the general trading public has fallen in love with this sector. Every time I suggest that resources are going lower or that commodities are in a bubble situation I seem to upset someone. I feel like a parent at a kids party, telling my kids not to eat too many sweets and not too drink too much red lemonade because it will make you sick.
Too many resources will be bad for your portfolios stomach at the moment, I'm just trying to be the good parent.
There are some good reasons to be vary wary of resources.
1. It's the contrarian trade, when everyone loves a sector, this much for this long it is definitely time to be somewhere else.
2. Commodities are in a bubble situation and we know what happens to bubbles, 400-500% moves in two years are unsustainable moves.
3. The Aussie dollar, is making us as a nation a bad place to shop as we are expensive to our trading partners. When it gets too expensive one place we look somewhere else.
4. Return on Equity for resource stocks is typically very low. Most companies have high capex. (ie they eat capital) They usually want more money from shareholders rather than giving back to shareholders. Even BHP with all it's growth is not going to increase it's ROE this year, it's putting it's funds back into other projects to fund more expansion and more debt.
How often do you see a capital raising getting done in the resource sector, it's almost every day at the moment. Resource stocks are a capital consumer like a V8 motor vehicle is to fuel consumption.
5. History always shows that most boom and bust scenarios are a result of supply and demand. I may not agree wholehearted with this but there is an obvious change in the winds at the moment. Indonesia, Philippines, Africa, Mongolia , the last couple of months this is where the new news on resources is coming from. Our miners have started to look abroad, are drilling abroad and are finding resources abroad. Each day the biggest news in resource sector is coming out of other regions, outside of Australa. The supply story is starting to unfold.
The following chart shows the CRB index (basket of 16 commodities) has broken down and is likely as a minimum to pullback towards the previous high, which is a further 15% lower.
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Daily Murmur 03/05/11
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Posted By:Gary Glover On:03/05/2011 09:41
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All the signs point to a top in Silver. The old high of US $49.45 per troy ounce recorded in 1980 squeeze was marginally broken over the weekend before rejecting this level sharply.
There was a massive spike in volume at the high looking at the longer term charts and this is a very strong sign of exhaustion.
Over history, all blow off trends, ie strong vertical trends end with a ¼ year time expansion, ie 90 day vertical drive from the last swing low. (gann theory) The last low here was Jan 28 and Silver has run straight up in that 90 day window over the weekend past. Timing was the last box to be ticked here and this is a perfect sell set up.
We also know that once we get a major high in place we get strong price rejection and considerable volatility. A sharp sell off like we experienced yesterday dropping from $49.5 to $43.5 (15%) in 24 hr window is what normally occurs at major peaks.
All the boxes are ticked here, exhaustion, volume, price rejection and timing.
Gold, although not half the bubble of silver has a very similar price set up at the moment and is vulnerable here also.
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Daily Murmur 21/04/11
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Posted By:Gary Glover On:21/04/2011 12:01
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Not sure I trust this market enough to stay too long here. IFN has hit the first key resistance here today. It will need to close above 50c to be meaningful longer term but traders might want to lock in some profits here.
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Daily Murmur 19/04/11
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Posted By:Gary Glover On:19/04/2011 14:43
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I sent this chart to my portfolio and trading clients on monday. This is the All Ordinaries chart and this bearish engulfing pattern is a very bearish reversal signal for our broader market. If you look through our key stocks RIO, WPL, FMG and ANZ all had the same bearish engulfing pattern. BHP had a massive shooting star formation on the weekly chart. All very bearish signs. Volume was also very high for the week.
I was wondering what might be the catalyst here and the U.S. debt issue could grow into to something more meaningful and could be a key theme for the bears going forward.
Our chart shows that our broader market indice could eventually trade as low as 4200, retesting the July 2010 low. This would represent a drop of about 15%.
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Daily Murmur 15/04/11
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Posted By:Gary Glover On:15/04/2011 09:40
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I think it will be a very important close today for our market and a lot of our major stocks. If the market remains weak to neutral today then we are going to end with many bearish engulfing patterns on the key stocks. This would be a very bearish technical signal so today will be very important for the short term future of our market. This was the fourth week up and we indicated previously that we could find resistance in time here this week, so a weak close today would be very bearish for the next month.
Individually we could end up with bearish engulfing pattern on the XJO, RIO, NCM and WPL. We also have a couple of shooting star candle formations which are also very bearish reversal signs and these include BHP and ANZ. The market will have to have some sort of descent rally to cancel these weekly patterns today, so the close will be very important today.
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Daily Murmur 07/04/11
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Posted By:Gary Glover On:07/04/2011 08:48
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Although the broader market has finished higher 14 out of the last 16 trading days I do think this stretched market can stretch a little bit further. I expect the market to mark 4 weeks up which will take us into next week some time. Hard to find value across the board here but at the same time its not quite ready to pullback yet either. I’ll be writing covered calls over the blue chips here as it continues to stretch to the top of the recent trading ranges.
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Daily Murmur 31/03/11
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Posted By:Gary Glover On:31/03/2011 13:27
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The XJO is approaching the upward sloping trendline which it broke below previously causing a rapid decline. I expect resistance at this point as we are basically almost there and friday from a gann timing perspective could be a significant date to monitor for a short term peak.
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Daily Murmur 25/03/11
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Posted By:Gary Glover On:25/03/2011 09:44
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Woolworths has made a bearish break below a major long term support zone. Does not look good at all and normally such a break would be followed by a retest of the previous low. This may trade down towards the $22 region longer term but don't expect it there next week as it could take some time to trade lower.
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Daily Murmur 24/03/11
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Posted By:Gary Glover On:24/03/2011 14:17
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As per the recent stockwatch video, we expect a sedate rally higher here over the next couple of weeks. I think it will be a slow climb and resources in particular look to be struggling to make much head way against the recent sharp sell off. Risks to the downside still persist but our 2011 forecast calls for more of a topping process first.
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Daily Murmur 15/03/11
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Posted By:Gary Glover On:15/03/2011 15:10
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XJO Where is it going?
We put out our recent 2011 forecast on the 7/2/11 (chart 1) and due to the 60 and 10 year being in tandem, this gave March as the most likely month for a high. (This is for both equities and commodities)
The current slide after breaking the rising wedge on the daily chart has been dramatic but this should be just the start of a larger topping process. Longer term we expect to see a retest of the May 2010 low but the norm is to see more of a topping pattern, which means we should see some wild swings up and down. September might be a bit too long an outlook as the move down has been impulsive but I do expect to see a few lower highs set up first so we should see a few sharp rallies on the way down.
The second chart is our most recent Elliott wave forecast and Wave 3 is 1.5 x wave 1 and wave 5 is .618 x wave 1. The A wave took the market down to .38% retracement and the C wave should eventually take the market towards the 50% region which is around the 4080-4100 zone. The recent bearish break is very decisive so lower levels will be reached over time but again expect a few sharp bounces along the way.
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Daily Murmur 07/03/2011
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Posted By:Gary Glover On:07/03/2011 15:14
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The green line is the Average True Range (10 days) and shows us when volatility is high or low. A spike in volatility, larger daily ranges will be accompanied by the green line moving higher and when the ranges tighten up and are smaller in nature it moves lower.
A nice bullish upward trend is usually common with lower average true range as you get a consistent climb without too many wild moves and a bearish move is usually consistent with a larger move in the average true range as volatility increases and move wild moves are prevalent.
Warning signs after a strong uptrend is an increase in volatilty as a topping process is the first step before a decline. This spike in volatility can be a topping process similar to the beginning of decline like in April 2010 or possibly a consolidation phase similar to November 2010. Either way, a rapid move upwards of the Average True Range is the first warning bell your likely to receive.
6 out of the last 9 trading days have seen almost 100 point daily swings with 3 of them over 170 points, so this could be a warning bell right here. If we see this Average True Range continue to accelerate like it did back in April last year we would view this as very dangerous.
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Daily Murmur 03/03/11
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Posted By:Gary Glover On:03/03/2011 10:42
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The XJO continues to bounce off the key support line. The main concern is that this larger pattern is a rising wedge which is a longer term bearish pattern. A small rally is possible here but I remain cautious here and believe a bearish break below this support line is imminent.
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Daily Murmur 22/02/11
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Posted By:Gary Glover On:22/02/2011 09:27
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CRB Index and The Dow Jones are showing possible gann timings of major high
CRB and the Dow Jones are running into a blow off type of exhaustion pattern. With three ascending trendlines over the longer term horizon establishing themselves the trend is at risk of exhausting into a peak. These sort of moves normally get vertical in nature and when looking at possible time horizons we use some of the normal gann timing cycles.
Most blow off style of exhaustive trends end with a 90 day vertical move into a high so the CRB Index has done this recently and shows possible timing of a high 21/2/11 (plus one or two days) and the Dow Jones Index 25/2/11 (plus one or two days).
We need to be wary of a possible high for both of these markets in the coming days.
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Daily Murmur 17/02/11
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Posted By:Gary Glover On:17/02/2011 10:59
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OST looks pretty positive at the moment. A bullish breakout of the downtrend suggest higher levels are likely. A safer trade for the options traders might be to sell a Mar 3.00 Put for around 18c. This equates to a yield over 6% if it closes above 3.00 at the end of march and if not you get an effective entry at $2.82 which is well below the current price of $2.93.
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Daily Murmur 10/02/11
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Posted By:Gary Glover On:10/02/2011 08:41
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News overnight included that Deutsch Boerse AG is in advanced talks to buy NYSE Euronet in an all stock transaction that would create the world's largest exchange operator following the London Stock Exchange Group Plc's acquisition of Canada's Exchange TMX Group Inc. This is likely to have positive ramifications for ASX and CPU and both of these could have a short term rally here. (The ASX in particular as the Singapore Exchange Ltd's offer to buy ASX will be revisited by the market again here today)
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Daily Murmur
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Posted By:Gary Glover On:08/02/2011 16:42
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We recommended BOQ to our broking clients on the 17/01/11 due to the fundamentals and technicals both supporting a strong bounce. The three thrust low sideways pattern is a very bullish set up longer term. All though we have had a nice bounce off that low this potentially has alot more in this so we recommend holding on for the longer term here as this should be only the start of a larger move. $11.80 is the upper band resistance point but a move above this level longer term could see a rally eventually towards the $15-$16 region. We should monitor closely but this trade has alot of potential upside so don't be too quick to sell into this current rally.
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Daily Murmur 02/02/11
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Posted By:Gary Glover On:02/02/2011 09:16
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Nufarm has been slowly climbing higher and building a constructive base. Notice how each pullback has sat on top of the previous high range and then rallied higher. The recent consolidation which has taken three weeks has just done it again building on top of the November high at the $5.20 region. For our gann traders, the current low is 60 days from the previous swing low and 180 days from the July low, all very bullish set ups on the technical front. An acceleration upwards is very possible. There is some risk here with some of the fundamental issues around debt still surrounding the stock but the technicals do look positive short term here.
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