Patience pays

As bullish as the Summers news may be, we are seeing some signs that make us cautious on the markets in the immediate term.  

Smoothed NYMO is nearing the top of the range, but may still have room on the upside

The 5 day new high - new low index continues to lag.  Can this take out the high from July or will it continue to diverge?

Although there are lingering doubts about the rally, big bullish options bets have been made.

TRIN is screaming that the market is getting short term overheated.  The reaction post gap will be telling.

Although this remains a stock pickers market, we need to let things at least cool off before looking for more equity exposure.  If we do this, we have a better chance at creating our own luck. 

Note: did some editing work to improve readability 9/16/13 3:48pm

Top groups update: Financials OUT; Gold Miners IN.

 Shortly after we started the top groups list, Financials have shown relative weakness.  In the last two weeks, it's become clear the strong relative strength up-trends have ended.

XLF confirmed it's relative strength (RS) breakdown, but price is still holding it's uptrend.  Given that and the slope of the RS uptrend, financials still appear to be fine investments long term.  
 

The KBW Insurance index is holding a key pivot line, while breaking a long term RS uptrend.  Again, we see money is flowing elsewhere and it's not worthy of a top group recognition at this point.

The KBW bank index is at a key level after forming a rising megaphone pattern.  Generally these forecast a trend change.  The RS support line will tell us a lot.  Maybe this will just muddle along for awhile?  Regardless, we know it's not top group worthy.  

So what do we replace financials with??  There are some good candidates out there as emerging markets in Asia and South America are starting to see some investment inflows.  The old adage investors make bottoms appears to be playing out again.   

That said, we're going with gold and gold miners.  You can see both have broken sharp resistance lines and are ALL forming price and relative strength head and shoulder bottoms.  We'll gladly trash this idea if gold miners lose the rising support line around the 25 level.  

You can play this a ton of ways.  NUGT is the 3x bullish gold miners ETF.  ABX, NEM, KGC, AUY and AEM basically track GDX.  The best stock play in the whole group might just be AGI.

This is one of the few gold miners above the 200 day moving average and it's traded sideways while other miners pulled in.  Note ~20 is heavy resistance, but that's nearly 20% away. 

Good Luck out there!   

Zooming out and embracing a potential sell-off.

Michael Gayed has one helluva interesting chart out on twitter pertaining to corporate bond yield spikes and market events.  If such an event were to occur, there are plenty of stocks that would be excellent buy candidates.  Here is a mix of a few stocks that have my interest.

SNE - with periphery Asian markets looking like death we're waiting on more weakness to pick this up prior to the PS4 launch.  I would love to strike on a chance to buy at the 40 week moving average.

CLF - This one is more of a maaaybe, but the potential makes it worth eying.   This mining stock has traded in a slightly tightening range between 10 and 108 since 2008.

Currently, we have a possible six month bottoming pattern forming.  We can buy anywhere, but the key level is the current 50D SMA level which also happens to be the channel line connecting shoulders in the head and shoulders bottoming pattern.

CREE - LED lighting and CREE bulbs in particular have taken over the lighting shelf space at my local Home Depot this summer!  This stock also has a long term congestion pattern that looks closer to completion than not.  This heavy sell-off is just the opportunity we've been looking for.  If it wants to break the 56 area, we can look towards the 52-50 area for support.  

RVLT might be another LED play if it can base out into the end of the year.  We have to wait for a clear stop area to develop.  There is just no way around that.  

ARRY - The spec of the group, this has pulled in to a long time support area after a major breakout.  The most definite stop area is the rising Green trend-line which is mirroring the 200 day moving average.  Time is definitely our friend here.

Updating 7/24's 'correction warning signs'

My last post a couple of weeks ago highlighted market warning signs via breadth and sentiment.

It can be read here:  http://atmcharts.blogspot.com/2013/07/correction-warning-signs.html

The market has been resilient as funds keep flowing into equities.  Although we still see reasons to be cautious on the markets, we've seen this all year, and a stock by stock approach has been the way to play the market.  Here are the updated charts:

NYAD topped at the prior high and has moved lower since.

Put call ratios have stayed very low.  Notice that this measure of CPCE hasn't reached the May low yet.

NASI pushed to mega overbought territory.  That's longer term bullish.

BPNYA broke the resistance line, but is now diverging with the May highs.

30 Day NYMO has broken resistance and looks much more constructive.

Charts of interest 8/12/13 - rising commodities

The kiwi has a hell of a strong right shoulder formed here.  Relative strength is leading the way.  

The metals to agriculture ratio chart is at a critical level.  So far the resistance T/L and right shoulder high has offered resistance thus far.  Which way will this end up going?   

A possible large strong bottoming pattern in Tin.  

Defensive groups are still showing bearish relative strength trends.  The effect of rising inflation expectations? 

Pharma RS appears to be bear flagging after a break below the triangle.  However, i'm not sure we can say this will definitely head lower.

XLP RS is turning lower after a back-test of a LT support line.

Despite the turn in commodities retailing relative strength looks fantastic.  Who would expect that??