Monday, November 18, 2013

FREECharts.com We Ignore These Obvious Indicators At Our Peril

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We Ignore These Obvious Indicators At Our Peril

 

November 18, 2013
In This Issue
Details of Next Market Collapse
December E Mini vs December Bonds
December Silver
December Corn vs Live Cattle
Copper, A Very Major Economic Indicator We Should All Watch

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Dear Friend,

 

The ignoring of two economic indicators may work for a short time but long-term I think this is going to be troublesome because they point to potential storms ahead in today's environment or clear skies at other times. 

 

I have written about the Baltic Index before when it was just under 1,000. Just a few weeks ago, the index was at 2146 and today it is back down to 1500, nearly a 10% per week drop.

 

This is not an indication of a global economy that is growing or even staying the same as just a few short years ago the index was in the 7,000 neighborhood.

 

Any of the indications that seem to be a little gloomy these days, by themselves, would not be much of a concern or a reason to look for reasons to short a market like the S&P. Once one ads several together, then the indicators can begin to paint a different picture. 

 

This is why it seems to me, folks should consider a plan to lighten the exposure to equities if they are all in the market at the moment. The old saying "rising tides raises all boats" works in reverse as well. Should the market have a pullback, even quality companies may be punished.

 

Using sound money management and being especially diligent going forward would be prudent.

 

Whether one agrees with the current regime in DC or not, they have so many plates they are spinning in the air, at some point something is likely to break. 

 

My suggestion is to be careful as we are definitely in the wilderness in more ways than one. This is a good time to keep your cards close to your vest, stay somewhat liquid, and be prepared and as nimble as you can be. That may not always be possible but if we try to do what we can, it will have to be enough.  


 

 

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December E Mini 

 

Out of the gates it looked like we would be seeing a big up day, which we did, but the market just did not have the legs to support it at these historic highs. Certainly interesting to think of being part of a positive event in history. We just don't want to be part of it like so many were in '08 and '09. 

 

I read today the retail investor has injected $167b since the first of the year while the institutional investors have injected only $111b. Generally, from what I have read, when the retail investor and speculator are injecting more money than the institutional investor, the market is often at an extreme. The public is believed to be the johnny-come-latelies to a rally and the ones to sell as a falling market finds support and turns back up. 

 

Had I gotten into a couple of the trades we had picked out, that would have been me but not everything convinced me the markets in consideration would be behaving the way I wanted them so we stayed on the sidelines. As it turned out, that was the best place for me and my clients to be.

 

I forecasted the e mini would probably go up due to the continued injection of funds from the Fed. Ms. Yellen will continue this policy and will continue to debase your currency. This will drive the Saudis as well as other major oil producers away the dollar and at some point in the future they will no longer be able to defend their petrodollar position.

 

For the moment, we are seeing the market continue up, in my opinion, virtually all based on the Fed conjuring money and whatever else they conjure.

 

 The indicators looked good for the bulls a few hours ago but now are looking a bit on the negative side. Every rally eventually has a bit of profit taking. Could this be the beginning of that? I don't think so unless something fundamentally more negative is going on behind the scenes that you and I can't see yet.

 

The stochastics turned down as did the RSI. The ADX remains at about 31 which indicates a pretty strong rally continuing so I would not count this market out just yet. 

 

On the other hand, I would not trade this market without some good stops in place. If you are trading on an electronic platform, be sure to print off your orders with order numbers.

 

Let's look at what the treasuries did today since the e mini had such a big day only to close just off the bottom.

 

 Friday we had an inside day which can indicate a change of direction in a trend. Or it can indicate a pause for a market to catch it's breath, build some strength, and go higher. 

 

That is what this market may have done. We will know in a few days.

The ECB approved the idea of taxing everything European citizens have at slightly over 28% so when these citizens discover what is heading their way, expect to see a flood of money coming here and the dollar to go up. 

 

With a much stronger dollar, albeit temporary, will weigh on stocks heavy. Bonds will benefit from the European cash exodus, unless the Europeans are quietly putting in currency controls as they are here in the US. 

 

If you don't think the current regime is doing that very thing, try wiring $100k outside the US.

 

 


December Silver

 

This past week I had several ask about silver. If my memory serves, it was Ricardo, Marshall, Rodger, and Sheryl sent a very nice note as well. Thanks to all and to the ones I have not gotten back to yet. I hope to get that done in the next couple days.

 

Here is the daily silver chart.

 

 As you can see, the ADX is indicating the trend is getting stronger so the silver bears will find that comforting. The RSI is slightly down and stochastics is very near the bottom.

 

To me, assuming Europe does not send trillions of dollars across the ocean and completely bugger up the system, it looks as if silver may be forming a bottom here for a short term rise to 21.30. 

 

If enough energy pushes past 21.30, I think we could see a testing of the 21.80 level then 22.40 is my next target.

 

This is a market that I think will require a 20 point stop to give yourself a chance to hang in but 20 points in silver is $1,000 in real money and silver can blow through 20 points very quickly. 

 

The 9 and 18 dma are both pointing down and show little to no relief so trade this market carefully. Holding positions overnight might not be the wisest unless you have stops or options to try to limit your exposure.

 

Wednesday I will look at this market from a longer perspective. 

December Corn

 

With Friday's forecast that 391 was still my target, we seem to be moving in that direction. December corn had a low today of 411 and I still think it is going lower, assuming the dollar does not get impacted by the Europeans.

 

 Looking at these indicators, it would appear corn has a ways to go before it hits bottom. When I read some additional articles about how corn is going to go much lower, then I will know the bottom is probably in and we are going to go back up. 

 

What I mean by that is when there is nothing but negative news out there, then there is no place for the market to go but up, in my opinion.

 

 Even with lower grain prices, look at the beating Live Cattle took as we head into the cooler red meat months. 

 

One would have thought the farmers would have held back their cattle and fattened them up on cheaper corn but so far, the price is in a retracement that will take the cattle down another buck or so and them we might see it stabilize.

 

Copper A Very Major Economic Indicator

Friday I wrote about another indicator and that is copper. We noted the Baltic Index earlier as well as the injection of retail investors over institutional investors as all being indications of a market towards the top. 

Copper is down near a multi-year low. Until this pricing in copper moves up, we just don't have an economic recovery. I better be careful or someone in DC will start buying loads of copper and ruin this indicator.


If the daily contract goes down more than it has the past six days, we would actually be at lows for the year. Let's look at a weekly chart to get a better idea of where we are over the past couple years.


We are currently at 315. A break below 300 and we could see a price collapse. You and I don't want that to happen as that will spur purchasing managers to cancel orders and hiring managers will cease hiring manufacturing workers. Existing workers will find their jobs in jeopardy. 

We need construction to pick up so I suspect banks are going to be given some extremely cheap money to stimulate housing. Sooner or later, even the leadership in DC is going to awaken to the fact that simulating the banks does nothing for the nations economy.
It won't be long before I have my other newsletter dedicated to options trading will be available. I will begin the no cost trial subscriptions around the first of the year. We will discuss the valuing of options, strategies, risk, profit potential, and the greeks.

I will ultimately be providing trade recommendations with a full trading matrix which will really give options traders a good understanding on the structure of the trade and the profit and loss potential. This is going to be a great newsletter as options open all kinds of opportunities for stock traders and futures commodity traders. You won't want to miss it so when you see the opportunity to sign up, don't hesitate as we can really have to limit the number of readers who will be getting the the entire package. 

I will be providing additional information in the coming weeks and some examples of what you will receive. We are going to have some live webinars to kick start our subscribers as well. It is going to be outstanding.

If there is a stock or commodity you have a question about, let me know. I will try to get back to you as quickly as possible and perhaps include your question in the next newsletter.

Hope you had a nice Veterans Day where we have the honor to give honor to the military that has allowed us to have the country unlike any other country in the world or throughout history. 

They have beaten back every threat thus far and pray they will continue to do so, whether that enemy is found to be foreign or domestic.  

Email me RBiggs@FREECharts.com with any questions or suggestions you have and I will get back to you as soon as possible.  
Sincerely,

 

Robert Biggs
Robert Biggs
FREECharts.com
Disclaimer: There is substantial risk in trading futures and options on futures. Past performance is not necessarily indicative of future results. You may make money or you may lose money regardless of whether you or an industry professional manages your account.
  

 

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