Is there an opportunity in natural gas (UNG)?

Today's market update will be brief, there are various interpretations. I would be cautious on either side; first couple of days will clarify certain things.

UNG Daily: Natural gas ETF is just below 50 DMA, decisive break of 50 DMA (11.11) should push price to 200 DMA (around 12.80). Last few days volume is high and it seems like it must be accumulation volume. There is bullish divergence in background. MACD has turned up and RSI can support higher prices. Bollinger Bands look good.

We have covered our short on Google and still holding Apple short.

Market update for next week?

S&P 500 daily:Market sold for most of the week but it bounced back on Friday, again in No Man's land. I will give it another day or 2 to resolve its direction. S&P 500 is very close to cluster support and 50 DMA, break of this support is bearish for the market in near term. Below is an S&P 500 chart displaying possible market path. With that in mind, I am publishing few charts which can be played in either direction. I think there is 60 %  probability that we are heading lower near term. We will know in couple of days.

TTM daily:Tata motors is just below 50 DMA, decisive break of 50 DMA (26.20) and the trend line is bullish. There is slight resistance around 27, conservative investors can wait for the break of resistance around 27. MACD has turned up; volume for the last 7-8 days is favorable. RSI can support higher prices.

KLIC daily: Look like this one is headed lower. There is an open gap at 7.25 to 7.99; it might want to fill that gap.

GES daily: If it breaks upper trend line resistance, it is bullish, break of lower support and it is bearish.

MHK Daily: It has formed a triangle, it should break soon, break can be in any direction, I think it will break upside, we will know soon.

We are still holding a short on Google, Apple (AAPL) bounced back from 50 DMA; if it turns around and break 50 DMA decisively it will provide a good short entry. No chart for apple (if you need to see the chart, please e-mail me and I will be happy to add to the blog or e-mail you the chart). I also see bullish pattern being developed in CNX (again no chart, if you need it I can e-mail or add to the blog).

Google a short?

It was an interesting week, market pushed higher and sideways for the first few days in a week and then on Friday it reversed. It is again in No Man's land. As always Mr. Market like to keep Bulls and Bears guessing.

$INDU 60 Minutes: DOW, I have highlighted 2 possibilities for the next week. Market being in No Man's land, I am publishing few long and few short ideas.

GOOG Daily: I see that Google is at the support line and Friday was a black candle. There is weakness in the background, stock is below 50 DMA. Volume pattern looks weak, break of support (grren line) might see price attracted to 200 DMA (545-550). MACD has turned lower and RSI can support lower prices. Decisive break of the support line should provide good short entry.

AFL Daily: There is a cluster of support between 50 DMA and 56, if it decisively breaks 56, next support is around 52 (200 DMA), I will be watching this closely.

HDY Daily: MACD has turned up, RSI can support higher prices, probable price target is 7.90/8.

BMY Daily: It has broken the trend line resistance, there is a clsuter of resistance between 26.40 to 26.80 (Not Shown), once cleared price target will be 28.40 and up. The only thing of little concern is extremely high volume of the last 2 days. High volume on up days is good but in the past when it saw extremely high volume, it was near the top.

EC Daily: It is very close to resistance, above the resistance line is bullish. MACD has turned up, RSI can support higher prices.

Last week we bought CNX and sold it on Friday, Market was weak in the morning and we decided to take the profit. We sold our ANN short position. We still have short position in X and have taken a position in SRS.

Are we done with the correction?

We saw first correction after many weeks. Next week seasonal are positive and I am also not sure if we are done with the correction. There has not been enough technical damage which means it can go higher. First 2-3 days early next week will provide more clues. One possibility is that we might complete wave B next week and then we might see another wave C leg down to 1285 (S&P). Market seemed to be in No Man's land.

Gold and Silver are on tear. It is possible that gold might reach new high and silver too.

I am publishing few long and short ideas.

CNX Daily: Looks like it has formed a high flag, Volume has been good for the last 3 days, it has cleared the resistance of the flag line, it closed above 50 DMA. MACD has turned up. Follow through will increase the odds. There is enough room on RSI to support higher prices.

UVV Daily: If it manages to clear first resistance we can easily see it rise to second resistance, if second resistance is cleared, we are looking at 45.75/46 price target. The pattern is double bottom, if true the potential target is 46. MACD and RSI can support higher prices.

MOO Daily: I think this has one more leg down. Price rise of the last 2 days in on low volume, it might test the trend line before turning lower in leg C down. Trend line is price resistance and 50 DMA is price support which puts this is in No Man's land. Next day or 2 should provide further clues.

AAPL Daily: Like MOO apple's rise of the last 2 days is on low volume and price is stuck between resistance and 50 DMA. This is also in No Man's land. Next day or two will provide further clue. I am showing the downside target if it breaks 50 DMA support. It can go either way, we will know soon.

KOL Daily: This is forming a triangle, difficult to say which way it will break. If I have to guess at this moment, I would say it has 60 % probability of breaking down. We will know soon.

Last week as per my watch list we took short position in X, we sold out short position in FCX. We also took short position in ANN.

Got to go now, looking forward to watch today's oscar awards ceremony.

Few Short oppurtunities

Today's update will be short. Market is resilient, divergences are forming all over but there is nothing bearish in the price structure. DOW transport made new high thereby erasing DOW theory non-confirmation. I think there is correction in cards but there is nothing remotely bearish in price structures of major stocks.

FCX Daily: Break of support (Green Line on chart) should trigger a good short entry. There are divergences, volume pattern looks good and Friday was a long black candle. I have highlighted the price target on chart.

AGU Daily: There are divergences all over, looks like a wedge, little early to say. Break of 50 DMA and support line should trigger a good entry.

X Daily: Another wedge like structure with divergences all over. This is on my watch list for possible short idea.

In the interest of full disclosure, last week we shorted FCX and AGU. It was aggressive at that time but price structures were compelling enough for me.

DOW Theory Non - Confirmation

This week's Market update will be short with no charts. We are seeing DOW Theory non-confirmation, this is not to say that the non-confirmation will continue but it is 3 weeks now and it assumes more importance as the time goes by. Trannies made high on Jan 13th and DOW is making new high almost every other day.

30 year bond is at serious capitulation and very close to long term support lines. If we look at TLT chart (this is not an ETF for 30 year but they move in tandem) we can see that it is near 2-3 years support line. Price action around this support line will be important. Significant and decisive violation of this line can and will have impact on economy. I don't expect that this support will be violated decisively, if it does policy makers will have something to worry about and make adjustments. Any rise in interest rates have direct impact on borrowing cost which impacts business, consumers, mortgage, auto's and the list goes on and on. Given the importance of interest rates; I will be closely watching the price action around the long term support line.

I am excited about tomorrow's Superbowl and hope that tomorrow's game is close and exciting.

Market Update for Next Week?

Volatility is high in the market, unrest in Egypt might be causing the panic. Market might be worried about Blockade of Suez canal and it's impact on oil prices. I expect volatility to continue in commodities especially in oil and gold prices. We saw gold and oil jumped up on Friday. I would stay away from gold and oil.

We saw across the board decline in stock prices but I don't see any significant technical damage. Next week price data should provide further clues and the geo-political events might continue to impact on market. We had good gain in gold and we sold our position on GLL. Amazon (http://bapus2cents.blogspot.com/2011/01/are-we-there-yet.html) and RSX( http://bapus2cents.blogspot.com/2011/01/whats-next.html) is still working well.

Nasdaq and Rusell 1000 is showing relative weakness compared to S&P 500 and DOW.

Nasdaq daily: QQQQ as a short idea or QID for going long(leveraged inverse QQQ ETF).

IWM daily: This is a short idea or TWM can be used as long idea (Inverse of IWM).

S&P 500 daily: SPY short idea or any inverse S&P 500 ETF for going long.

EDZ daily: Long idea.

SRS daily:  Long idea.

What's Next?

Last week we discussed about market correction and we did see some correction in Nasdaq and small cap stocks. S&P 500 held relatively well and DOW was up for the week. Looks like market is reducing the risk. Gold, Silver and Amazon (AMZN) played exactly as per our expectations.


Nasdaq is breaking down; I have highlighted the next stop on the chart. You can look at QQQQ (ETF for nasdaq 100 as a short idea).

Russell small cap index saw significant correction; looks like next stop will be 50 DMA. You can look at IWM as short idea (ETF for small cap index) or TWM as a long idea (inverse leveraged small cap index ETF).

S&P 500 held relatively well, next few days of price data will provide further clues. I have highlighted support areas; I will be watching the price action around these support areas.

AMZN Daily: This one is right at 50 DMA, I have highlighted the next likely support areas.

AAPL Daily: This is very close to 50 DMA and support area, if it breaks this support, most likely next stop is 200 DMA and a highlighted trend line.

CRM Daily: I have highlighted the most probable path this will take; it doesn't have to take that path. Chart looks bearish to me and this might be heading lower.

RGLD Weekly: Most probably RGLD is heading towards the highlighted support area.

RSX Daily: No divergences on daily chart but we can see bearish divergences on 60 minute chart (not shown), if it breaks the highlighted support line, likely next stop is 50 DMA (highlighted on chart). This is an aggressive trade but is providing good risk/reward ratio.

GOLD and SILVER is playing as per our expectations.

OIL: I will be cautious with oil, looks like it has formed a terminal wedge (though it is not a clear wedge), if it is wedge, it will head lower in near term.

Are we there yet?

I have been expecting some kind of correction to start in the second half of January, if the correction is in the cards, it should start very soon. Tomorrow or early this week will be a good time. If not, we should always respect Mr. Market.

$VIX Weekly: This is very close to long term support line, Jan 2010 and April 2010 correction started when VIX was close to this line. I will watch this line for further clue.

$INX Daily: I am expecting the resistance lines to hold, we might get a head fake but there is a high probability that these resistance lines (Green) should hold. We will know very soon.

GOLD: I wrote about GLD (Gold ETF), I was expecting it to test the trend line and head lower; it has played as per our expectations. The chart still looks bearish and RSI can support lower prices. GLL is an inverse leveraged gold ETF.

Sliver: Silver is in line with gold, I published a SLV chart sometime ago; it is also playing as per the expectations. It has further bearish potential. ZSL is a leveraged inverse sliver ETF.

I am publishing few short ideas, some of them are high risk shorts and some of them are high probability shorts.

EWO: This is an Austria ETF, looks like it is about to complete wave b or 2 and wave c or 3 is about to start, price is still in uptrend but can be shorted in anticipation with tight stop loss, will provide high risk/reward ratio.

TLCR: Another short idea, chart looks bearish to me and this is providing a good risk/reward ratio.

AMZN: Looks like it has formed a wedge, if indeed it is an ending diagonal than I am expecting one more price burst and than a reversal. There is nothing bearish about this chart but if the reversal occurs it will be swift. This is high risk but risk/reward ratio is good with proper stop loss.

Market Update

Market sold off on Friday but at the end buyers stepped in and most of the losses were covered leaving a bullish hammer. Last couple of days, market has shown some weakness in the begining but nothing bearish on the price structure. It is overbought and might be just working the overbought levels. Need more price data to confirm the direction. Financials were showing weakness and we took a small short position in XLF. $VIX is still in no-mans land. JNK reached new high showing risk appetite is back in the market, it might be forming a divergences before rolling off.

I am listing 2 charts one bullish (SPWRA) and 1 bearish (EPP), we don't have any position in these stocks and ETF.

SPWRA Weekly: It is showing head and shoulder pattern on weekly chart, break of the red line will activate this pattern. Left shoulder is little lower than right shoulder or right shoulder is little higher than left shoulder (not perfect) but still valid.

SPWRA Daily: It is showing the bullish flag or wedge pattern, break of the green line is bullish. It has also tested the flag line. 60 minutes chart pattern (not shown) is not ideal so proper risk management is required. For aggressive investors early entry can be taken by using lower time frame chart.

EEP Daily: It is showing double top pattern, decisive lower break of green line will activate the short signal. Bottom green line is likely target. Friday's price action has left a long lower shadow (bullish) but rebound volume is questionnable.

US Dollar & Market Update

US dollar has done well for last couple of months. Let's look at UUP chart (US Dollar Etf). Looks like it has completed A-B-C correction pattern, it is pushing the trend line resistance. MACD is trying to turn up and RSI has plenty of room to support higher prices. If A-B-C correction is indeed complete, 200 DMA seems like a initial target, higher potential exist. 

Please see we have position in UUP, we took the position when QE 2 was announced. At that time there were 98 % dollar bears and price structure looked complete.

Silver is holding well for last couple of days, it is testing the trend line. If the correction has started then it should fall soon within few days. MACD has turned down, RSI has plenty of room to support lower prices. You can look at ZSL, it is leveraged inverse silver ETF. Please see, we also have position in ZSL.

$VIX head and shoulder pattern is still a possibility, it is not showing any directional bias. It should break out soon. We will know soon.

S&P structure looks complete, it is still bullish with no price exhaustion. Today we thought price is turning down. We will know soon.

Gold and Inflation?

Gold goes up in inflation, this one seems so obvious. The central bank or Government print money (bonds, notes), prices for things go up in response and as a result of this inflation gold prices must go up. Gold price rise with inflation is it a myth or truth? Let us look at history of gold prices.

Inflation occurred almost nonstop after great depression, yet gold prices hardly moved till 1970. Yes the gold prices were fixed by the government but market forces are bigger than government. Gold prices rose from 1970 to 1980 and consensus was gold is catching up to the inflation and predicted gold to continue to rise with inflation. Gold lost close to 80 % value between 1980 to 2000 whereas inflation continued for this period. Gold rose close to 400 % from 2000 to 2010 and this decade was a deflationary decade.

Let’s summarize the numbers

1930 - 1970 – Relentless inflation – No change in gold prices

1970 – 1980 - High inflation – Gold prices soared

1980 – 2000 – Nonstop inflation – Gold lost 80% of its value

2000 – 2010 – Deflation – Gold gains close to 400 %.

Gold prices go up in inflation, Myth or Truth?

This is not to say that the gold prices won’t rise or fall, it will do what it has to do but the question is, is it because of inflation?

Let's examine current GLD daily chart (Gold ETF)

We see divergences, it has failed 3 times at the similar price level, maybe triple top? If it breaks drawn support line and 50 DMA which coincidentally is same as support line, we can see some down movement. In the interest of full disclosure, we do have a position in GLL (which is inverse of GLD), we took this position after it failed at the 2nd top.

We also sold our EXPE today for a small gain. Market direction is not clear yet. Some of the charts have started showing topping signs, we will have wait for more confirmation.