Technical Analysis

All you need to read.

Today FX markets seem to be
driven by technical analysis and news flow.   Our approach has been to analyze what investors have
been doing, rather than what they say they are doing.   To accomplish this, we compare the Euro currency
against data taken from the Commitments of Traders (COT) reports.  The first chart shows the Euro (EC) as
the black line compared against the net speculative long open interest
(EC_NCPLA-EC_NCPSA) in the blue line.  

All you neewd to read.

Recently, public interest in gold and silver and gold/silver mining stocks has been at multi-year lows. And that is a super bullish contrarian indicator.

While relying on technical analysis and chart patterns may lack the academic rigor that fundamental analysts (such as Bill Miller) and economists (such as Joe LaVorgna) assume, it seems that relying on the reality of what is actually going on within businesses is a fool's errand currently. Furthermore, the just-around-the-corner nominal price action impact of a Fed-driven QE3 expansion is on every long-only manager's mind as good is bad and bad is great. As an antidote to this enthusiasm, Dolmen Securities note two longer-dated chart analogs that should provide some food for thought for the more bullish equity investors (which now represents the massive majority of individual investors). The 115 year Dow chart points to sideways price action in a broad range to an 80 year trend at best while the analog to the wave structure from the 2011 peak in the S&P 500 is echoing 2007/8's pre-crash levels rather accurately. While neither chart portends or guarantees an imminent precipice, given earnings downgrades and the box Bernanke appears to be increasingly squeezed in, perhaps they signal the flush that the market needs as an excuse to ramp up the printing press one more time.

Life goes on, so does the stock market. 

In their 2012 Technical Analysis outlook, UBS, the Swiss bank that seems the most desirous of a helping hand from any and every printing-press manufacturer in the world, sees both a major cyclical bottom forming in 2012 based on a confluence of cycles as well as a very timely long-term sell-signal based on one of its proprietary models. We assume that the downside (based on their composite sell signal which triggered last May and has a 10-13 month lag to cycle lows) they see in equity market, as the Juglar and Kitchin cycles trough together, drives Central Banks to finally flip the switch and save the world (in nominal terms) around mid-year. In the meantime, we will see QE3-based disconnects ebb and flow day after day as volumes wax and wane from panic (buying or selling) to vacuous - where rallies should be faded and not chased. Combine these two charts with their views on cycle lows in election years, years ending with a '2', and decennial cycles and it appears technically we are all set for a tumultuous year.

In the last week of trading, the only variable that mattered was the EURUSD, much more so than at any time in 2011, as the correlation between the FX pair and the SPX hit a near all time high. Which is why it is not surprising that China is now the de facto saviour not so much of Europe (as discussed earlier), but of America's wealthiest, as the only Central Planner mandate continues to be to keep the Russell artificially high for as long as possible while the oligarchy converts paper wealth into hard assets (yes, Comex physical silver just dropped to a new all time low on Friday). And with technicals mattering far more in FX than in stocks, we once again present John Noyce's weekly technical compendium and podcast, as all the major risk indices continue to be at key inflection points. This is particularly true of the GBPUSD, commodities (CRB), the Shanghai Composite (which just closed below the October 2008 primary updtrend, slide 13), Spanish 10 Years, also Irish and Portuguese bonds, the AUDUSD, but most importantly the EURUSD, which is at 2 standard deviations above fair value which is at about 1.15. Should it revert to that level, the S&P would find itself at about 900 if not lower.

Multi Technical Analysis method based Technical Confluence Support & Resistance PowerZones for the S&P 500 futures

Some more interesting technical considerations, compliments of John Bougearel, Research Director at Structural Logic.