Market Commentary as of Friday, June 12, 2009

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Fari Hamzei

As you can see in the charts below, starting with the left hand side, the rising S&P-500 Cash Index has been accompanied with lower and lower directional momentum, and thus creating a "bearish divergence" with the SPX.

In the right hand side chart, we show two proprietary modified Breadth (Advance Decline) data subgraphs. The longer term sub-graph (SP1) shows a modified cum A/D line superimposed with its sigma channels. The lower subgraph, MoMo, is a short-term A/D Oscillator. Notice the long-term vs short-term are also in a very pronounced "bearish divergence" pattern.

THIS TECHNICAL ANOMALY WILL NOT LAST FOREVER. It will resolve itself sooner than later. What is currently unknown is that the proper catalyst for the upcoming reversal.

If you are LONG, watch your trades very closely. If you plan to STAY LONG, start looking for some portfolio insurance (O-T-M Index /ETF Puts).

Market Timing Commentary as of Friday, June 5th, 2009

Tweet Market Timing Commentary as of Friday, June 5th, 2009

Fari Hamzei

A mixed picture at best, is one way to describe the latest US Equity Market charts and internals line-up.

And I am standing by my May 22nd short bias on SPX for Timer Digest's "Timer of the Year Competition." That being an intermediate term signal, my charts and indicators tell me to give this short a bit more time to work itself out. Here are some reasons why:

1. SP-500 Advance Decline Line Diverging (in an "M" pattern) from the Cash Index itself is trading higher (Chart 1, 2nd subgraph).
2. Volatility Indices receding again (setting up for a "W" before spiking higher - Chart 2).
3. Signs of Bond Vigilantes coming back -- TBT price action and options activity.

Notice of Change of Bias with Timer Digest

Tweet Notice of Change of Bias with Timer Digest

Fari Hamzei


Dear Jim,
Please log me in as SHORT on SPX as of Friday, May 22nd, 2009 Close of 887.00.

Have a great Memorial Day Weekend......Go Danica Go !!!

A Quick VXO (the original VIX) Update

Tweet A Quick VXO (the original VIX) Update

Fari Hamzei

In my last webinar, on May 9th, I talked about VIX/VXO/VXN complex trading below 30. But as you recall, I talked about not the absolute level of this complex, but rather, its relative level (in Sigma Levels).

As you can see from the chart below, today, we broke 30 on VXO but we did NOT get to trade at -3 Sigma Level. That level now stands at 26. That is our next goal post. A bounce from 26 should mark a short-term "maxima" in prices for this leg.

More on this and other Mark Timing Tools, this Saturday in my webinar.

Market Timing Charts Update

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Fari Hamzei

We had a few emails asking us for a quick update on our Market Timing Charts given the price action we have experienced in the last couple of days. Here they are:

Worth noting:
A) McClellan Oscillators have entered a slight oversold condition (down to less than -100 readings in three trading days).
B) SPX failed to touch its 200-day Moving Average.
C) NDX closed below its 200-day Moving Average. We talked about this possibility in our last Saturday Webinar
D) Down to Up Volume Ratios in NYSE and NAZZ were 11 and 22 to 1, respectively.



Note: Huge drop in DJ Trans and Russell 2000 to -1 sigma level. Bad leading indicator for the economy (going forward) and risk-takers (weak hands in small caps got their head handed to them).




Note: VXO bounced off -2 sigma yesterday and jumped today. Never made it to -3 sigma (our target). May Options X is here in the earnest.

Outside Bar on SPX and Rapid Deceleration of NDX Momentum

Tweet Outside Bar on SPX and Rapid Deceleration of NDX Momentum

Fari Hamzei

These two observations, ahead of the much anticipated April Non-Farm-Payroll data to be released tomorrow at 0830 EDT, call for high level of vigilance and alertness. We discussed their ramifications in detail on the Twitter tonight.

Trade Well Tomorrow.

The Ord Oracle on SPX and Gold

Tweet The Ord Oracle on SPX and Gold

Tim Ord


Momentum is the name of the game for now and right now most momentum indicators are still moving higher (NYSE Summation index and Cumulative advance/decline line on chart above). Yesterday the SPX jumped through the 875 resistance and for now the 875 area made provide support. If the Momentum indicators don’t turn down for near term then the market may head to the January high near 940 level. We have draw a line from the 940 range which could turn into a Neckline of a Head and Shoulders bottom where the left shoulder came back at the November 08 lows. If the SPX tests the January highs on higher volume then that would be a very bullish development and give credit to the Head and Shoulders bottom pattern. A pull back still would be expect and could pull back down where the Left Shoulder bottom which is near 740 range. There is an old adage that says “Sell in May and Go away” and may hold true this year also. We will watch the Bullish Percent index, Summation index, Cumulative Advance/decline line and MACD closely for the next clues for a downturn in the market.


Above is the Venture Composite index ($CDNX). This index has around 528 small mining companies that are mostly small gold miners along with some small oil companies. This index is a gold proxy for small junior gold miners’ performance. In the middle window is the ratio between CDNX and XAU. When this ratio is rising is shows that the small gold miners (CDNX) is outperforming the big gold miners (XAU). In generals we expect this ratio to continue to rise for the longer term. What this ratio implies is that the smaller gold companies will outperform the larger gold companies in the months and possible years to come. However, we will wait to buy these issues until the pull back is complete. See next chart.


Above is GDX. We have labeled what we believe is the correct count for Elliott Wave. An Elliott Wave 5 was completed at the February high near 38. Currently GDX is performing a consolidation in the from of an ABC and GDX is about to start the next 5 count down in the “C” leg. The “C” should end near 27 which is also the bottom of Wave 4 and an Ideal place where normally consolidation end. From the 27 level, GDX should start another Elliott wave 5 count up that should not be less then the first Elliott wave 5 count up that started in October 08. The Elliott 5 count up from the 08 low traveled 22 points. Add 22 points to the next possible low near 27, would give an upside target to 47 at a minimum. A lot of times Wave 3 of larger degree (that is what the next wave up will be) is extended. Our view is that it will reach near 57. We still expect a pull back to possible 27 over the next several weeks so we will put off any new buys until then.