Technical Action Yesterday

Technical action by S&P 500 stocks was quietly bullish yesterday despite the strong gain by equity indices. Three S&P 500 stocks broke resistance (Hospira, Johnson & Johnson and PPL Corp.) and one stock broke support (Family Dollar Stores). The Up/Down ratio remained unchanged at (121/335=) 0.36.

Technical action by TSX Composite stocks also was quietly bullish. Three TSX stocks broke resistance (Empire, UTS Energy and Uranium One) and one stock broke support (Provident Energy Trust). The Up/Down ratio improved from 0.69 to (76/104=) 0.73.

Interesting report out of China on gold demand

Gold demand in China, the world’s second-largest consumer, gained in the first half as government measures to cool the property market and falling equities spurred investment demand, the Shanghai Gold Exchange said.

The total volume of gold traded on the exchange jumped 59 percent in the first six months from a year earlier to the equivalent of 3,174.5 metric tons, said Song Yuqin, vice general manager at the exchange. Silver turnover soared more than fivefold, Song told a conference in Beijing today.

Gold surged to a record last month as investors sought to protect their wealth against the market turmoil caused by the European sovereign debt crisis, including declining currencies. Song’s remarks add to signs that investors worldwide are boosting holdings of the commodity.

“Gold- and silver-trading volume expanded sharply in the first half of this year because a declining stock market, the government’s efforts to cool the property market and the general volatility in the global financial market have all fueled the investors’ enthusiasm,” Song said.

Tech Talk comments: The period of seasonal strength for gold and gold equities is approaching. Gold equities usually lead gold with a seasonal entry point near the end of July (on average)

Accordingly, gold and gold equity ETFs are on the radar screen for a seasonal trade. However, technicals for gold equity ETFs are not set up yet for the seasonal trade. MACD and RSI continue to trend lower from overbought levels. Only Stochastics are short term oversold. In addition, gold equity ETFs are not outperforming gold yet. Please be patient!

Interesting Charts

The rally by U.S. equity markets yesterday was encouraging and predictable. Markets are recovering from short term oversold levels. Upside potential for the Dow an S&P 500 Index is to their 50 day moving averages, a level that is not far from current levels. Their 50 day moving average has proven to be a reliable resistance level in recent weeks.

Nice breakout by Johnson & Johnson yesterday! Among other things, JNJ is a major medical device manufacturer. Medical device stocks and ETFs have performed well in a difficult equity market during the past month. Short term momentum indicators for the sector are starting to recover from oversold levels.

The Agriculture sector appears to be entering into its period of seasonal strength earlier than usual this year. Historically, its period of seasonal strength is from August to December with a sweet spot from October to December.

The sector is gaining strength from higher grain prices.

Selected equities in the sector are showing early technical signs of bottoming (most notably fertilizer stocks such as Agrium and Mosaid). Stocks in the sector already are showing good strength relative to the market.

Ditto for the U.S. Agriculture ETFs!

Editor Note: Highly recommend that you take a monday morning visit to Don Vailoux’s monday report where he analyses an astonishing 40 plus Stocks, Commodities and Indexes.

Don Vialoux has 37 years of experience in the Investment Industry. He is a past president of the Canadian Society of Technical Analysts (www.csta.org) and a former technical analyst at RBC Investments.  Now he is the author of a daily letter on equity markets available free on the internet. The reports can be accessed daily right here at www.dvtechtalk.com.

Impossible! That’s what institutional investors say about “Timing the Market”. Mr. Vialoux will explain that, indeed, it can be done with the appropriate analysis. He also will explain why timing the market will be important during the next decade. Buy and Hold strategies are not working anymore; Investors are looking for alternatives. Mr. Vialoux will demonstrate four techniques that can be used to time intermediate stock market swings lasting 5-15 months. The preferred investment vehicles for investing in intermediate stock market swings are Exchange Traded Funds.

Comments in Tech Talk reports are the opinion of Mr. Vialoux. They are based on technical, fundamental and/or seasonal data that is believed to be accurate. The comments are free. Mr. Vialoux receives no remuneration from any source for these services. Comments should not be considered as advice to buy or to sell a security. Investors, who respond to comments in Tech Talk, are financially responsible for their own transactions.

“perhaps the Biggest Freaking Bargain (BFB) of the century!”

Seriously Underpriced Silver

Seriously Underpriced SilverThe impetus for my New Mogambo Crusade (NMC) to acquire more silver came as a result of reading in Ed Steer’s Gold & Silver Daily where he noticed in the Comptroller of the Currency’s “Q1/2010 Report on Bank Trading and Derivatives Activities” that “the bottom-line numbers show that two US banks… JPMorgan and HSBC, USA hold between 97% and 99% of all the gold and silver derivatives held by all US banks.” Yow!

This is a result of naked short selling. Normally, to short something, you would have to borrow it from somebody, and then sell that. Now, to short gold or silver is as simple as getting somebody to pay money for a piece of paper that says it represents gold or silver. Easy! There is nothing behind it!

….read more Seriously Underpriced Silver HERE

Chart provided by Money Talks (click on the chart or HERE to read the article)

So now we have a fiercely oversold market sparked by a Dow Theory non-confirmation.

This should revive bullish sentiments although I believe only sharp traders and speculators will profit from this “sudden” rally. As I see it, the bear is passing time and having a little fun with the stock market crowd. And all the time, the top of this rally from the June low grows bigger and bigger. By the way, now you see why I warned subscribers to avoid selling short. If you’re short, you can be killed by a rally of this intensity. – Richard Russell July 7th Dow Theory Letters

SENTIMENT POLLS GET THE BULLS EXCITED

Well, we had Doug Kass declare that the lows were already turned in and at the same time we received the Investors Intelligence poll showing that sentiment was at the lowest level since July 2009.  Interestingly, back in July of last year, the S&P 500 was struggling at the 900 level!  Anyway, the reality is that bulls still outnumber the bears— 37.0% (from 41.1%) versus 34.8% (from 33.3%).  Believe it or not, the correction camp only has 28.2% in their ranks. – Full Rosenberg Report HERE

Todd Market Forecast for Wednesday July 7, 2010

Available Mon- Friday after 6:00 P.M. Eastern, 3:00 Pacific.

DOW                                  + 274 on 2200 net advances

NASDAQ COMP               +66 on 1350 net advances

SHORT TERM TREND                           Bullish

INTERMEDIATE TERM TREND          Bearish

There were a few positive news items on Wednesday, but for most of the session, observers were remarking that the rally wasn’t being driven by anything in particular, as if that were a negative.

Actually, some of the best rallies come when everyone is scratching his or her head and can’t figure out why it’s happening. Today on CNBC, a lot of analysts were telling us that this is just a flash in the pan. We didn’t hear anyone say that it was time to get on board.

We have found that when 10 day RSI becomes oversold and curls up sharply, that it is normally an indication that the market wants to go higher although there have been a couple of recent failures. We can see this in the chart below. In other words, it’s not enough to be oversold, the market has to demonstrate that it can rally in an impressive manner. We would have preferred better volume, but it was better than yesterday’s.

We’re still in the grip of a pattern of declining tops and bottoms, but we’ll stick our neck out here a bit and move back to a bullish short term posture.

The dollar dropped and this helped gold, silver, copper and crude oil to a bounce. Bonds were down for the session.

BOTTOM LINE:

Our intermediate term systems are on a sell signal.

System 2 traders are in cash. Stay there on Thursday.

System 7 traders should stay in cash for now.

NEWS AND FUNDAMENTALS:

MBA purchase applications dropped 2.0%. This was less than last month’s drop of 3.3%. On Thursday we get jobless claims and crude oil inventories.

OTHER MARKETS

We’re on a buy for bonds as of May 4.      

We’re on a sell for the dollar and a buy for the euro as of June 15.   

We’re on a sell for gold as of  July 1.       

We’re on a sell for silver as of  July 1. 

We’re on a sell for copper as of April 27.                   

We’re on a buy for crude oil as of May 26.   

We are long term bullish for all major world markets, including those of the U.S., Britain, Canada, Germany, France and Japan.

Todd Market Forecast – Subscribe online HERE or Contact HERE

Stephen Todd  RANKED # 1 BY TIMER DIGEST

A Short Biography

His stock market commentary is heard on CNBC, Bloomberg, Associated Press Radio, Business Radio Network, CKNW in Vancouver,  British Columbia, KFWB, Los Angeles and ROBTV in Toronto, Ontario.