Patents heating up

As attention turns towards patents based off this weekend's court rulings, I'm taking a look at the Ocean Tomo 300 patent index.  The index is made up of stocks with the largest % of intellectual property value vs book value.  This link has some background on the index, components etc.

  

There is no precise way to play this potential break out but be aware that the investment world is now looking harder for valuable intellectual property.  A couple of popular patent plays VHC and IDCC could get some love off of this news.  

Some Observations

US Dollar:S&P 500 correlation is rising on a ST time frame and bottoming on the weekly.

The Euro is at some serious horizontal resistance and the top of a bearish wedge.  Does the market expect more Euro easing soon??

Breadth is diverging across the board.  

China is getting weaker and weaker even though most world markets are rising.  You've got to expect China will lead the next leg lower in the markets.  

The CRB:SPX Ratio is forming a bullish head and shoulders.

The CRX:CRB is in a bullish consolidation.  It looks like commodity shares are going higher.  

Restaurant index is shaping up to be quite bullish in the short term.  Some names I like long include: MCD, PNRA, BWLD, DIN

The action in junk bond ETF's JNK and HYG suggest risk is still on.  

IBB:XBI ratio is starting to signal RISK ON in the space.  

    

Bullish percent indices signaling trouble?

I noted the slope in the NYSE bull % index yesterday on stocktwits yesterdayhttp://stocktwits.com/AaronJ. As you can see this is a significant change in character from all the other bull market rallies since the major lows of 2009. This simply tells us there are fewer charts standing on firm ground. To make the analogy literal imagine trying to run up a hill with sand up to your knees.

I'm particularly concerned with the Nasdaq Composite bull % index. Notice during this summer rally the index has bounced around the 50 level after falling from the bullish 70+ area. When these bull % charts bounce around the 50 level after it leaves an extreme, it tells you the larger trend is changing.

Looking at the summer of 2010 you can see the indices did this same dancing. The key difference was the indices were consolidating and not advancing. You can also see the bearish divergences between the bull % indices and price of the markets have been building for years.

It is safe to say this evidence is a concern to the longer term bull case. My hypothesis is the major indices will double top if these indicators don't significantly improve(note it is just a hypothesis).  However, there are strong bullish seasonality factors currently in play and we need other evidence to act on any hypothesis. At this point, who knows when the music stops?

***Update*** 3/5/13 Obviously this was poor interpretation of these indicators and we will try our best to keep this kind of crap off of the site in the future.  

A look at SPY

This is my daily view of the S&P 500 ETF.  We are currently trading below the lower trendline of a pattern associated with market tops.  With major long term resistance at 142, the bears have two significant levels to trade against.  Until this changes, I must maintain a market neutral stance. That said, the moving averages and rising trendline clustered together give a very powerful support level for bulls to trade long against.  If that cluster of support is clearly lost, there may a sharper drop in the markets as there is no strong support untill 135.80.  I will wait until the market leaves the congestion zone to chose my positioning.  Until then, trade em' well.

Chart read: Interclick

In my last Interclick post I was looking for a pullback to enter.  Now the stock is in a very vulnerable position similar to many small cap growth names.  The weekly chart shows it has broken it's somewhat generous trendline that has held since the 08' crisis.  It also has broken all key weekly and daily moving averages.  The RSI and MACD indicators also show that there is more downside to come.  Those signs clearly tell me to stay away from this stock until conditions improve. 

If you are interested in owning this stock for longer than a few hours use a very tight stop.  I would simply wait for much better prices.  The prior support levels I will be watching are 5.05, 4.60 and 3.40.  I suspect this stock will take another big beating as the market continues lower. 

Note: I have no position.