hctv presents willy wonka monday, page-4

Something to ponder as we look at the technical side of the market for another week – In July 2007 Margin Debt on the NYSE reached 381 Billion. At the end of January 2013 Margin Debt stood at 364 billion. Obviously February’s figure, when it becomes available, will be even higher. Australian greed has not reached anywhere near 2007 levels which of course will ultimately be a plus for us but the New York figure does increase the dangers of a “financial accident”.

So many conflicting signals this week.

At the end of last week I mentioned that the SPX had had five little waves down and five waves on their own normally wouldn’t herald the end of a move so of course we had another sharp decline the next day with the Dow losing over 200 points and the SPX coming back to sit nicely on its uptrend from the November low. Since then the SPX has continued to trade in the 1500 to 1520 band, for the fifth week. However, this drawn out action in this tight price band, leaves open the possibility that it is a fourth wave and that we still have a fifth wave up to complete the sequence.

What is absolutely amazing is that the SPX spent 27 weeks backing and filling while building a top in this 1500 area in 2000 and then in 2007 it spent 33 weeks forming a top in this precise zone again so little wonder that investors are meeting resistance here. Ultimately I believe the SPX will break through but my concern is the short term path. The FTSE and the DAX are in the same situation – fighting the resistance from their tops in 2000 and 2007 around their current levels. Meanwhile the XJO has retraced a fraction more than 61.8% of its entire decline from its all time high taking it back up under its old top pattern. My World Index is up to the same point as the 2000 high but under the top pattern of 2007.

The Advance Decline in New York hasn’t been pushing higher after having led this entire rise. Also the Advance Decline of the money in rising stocks and falling stocks is certainly not keeping pace. This suggests that there could be a lot of selling going on that is being masked by the performance of the overall index.

My chart of the year - RUT – is still keeping my main indicator on this index positive. Mind you that dip this past week gave danger signals but it rallied just in time but it CANNOT afford to weaken off here at all or it will give a medium term sell.

And yet, in the midst of all these worries, one of the overall indicators on the NYSE, that works quite well at lows, gave a buy signal at last week’s low. Doesn’t measure the extent of the rise just that it was in buy territory but increases the risk that we could still have some sort of panic spike up.

Then we have a stock like Apple. The Dow doesn’t include Apple so I am taking less notice of the performance of the Dow . Apple is the largest capitalised company in the world and I do not for one minute think we can ignore it. The S&P and the NASDAQ certainly are feeling the weight of it’s sagging share price. By the way, the stock went back up and almost filled the horrendous gap it left some weeks ago but on Friday was back at a new low for this move. My next target on this stock that I mentioned earlier is $400. Then I would like to have another think about it.

Currencies continue to be a minefield. The US dollar has been strengthening but looks overbought short term while the Euro, along with just about everything else, has been weakening and looks oversold. The bullish ETF of the U.S. dollar closed higher in Friday’s trading but well off its high on very high volume. Not a good sign, short term, for the bulls. Normally I would expect stocks to go up if the US Dollar weakens but that hardly fits at the moment or is the link between all markets in the throes of change again. Has happened before. And don’t forget the little Aussie battler. Everyone wants it lower but I am concerned it might be a case of ‘be careful what you wish for’. Been in a tight band against the U.D. dollar for some time and wouldn’t take much to push it either way. I am a little concerned that so many people overseas are watching our dollar as a measure of the risk on/risk off argument so that if it breaks it might attract just a bit too much attention. Also the carry-trade between the Aussie and the Yen is a fairly frightening chart that could be topping. If there was suddenly unwinding of the carry trade, it might cause problems. Just one more cross-current of which to be aware.

Copper is probably causing me more worry than just about anything else. So important to many Australian stocks and overall sentiment which is why it is so often called Dr Copper. Mind you, it has been threatening to break down for months but has been able to pull itself together and even rally enough to look at overhead resistance. But time doesn’t appear to be on its side at the moment so it must rally or is will fall of its own weight.

Gold and silver came back to around the previous week's low. Silver looked a wee bit interesting and if I can get the cash price back above $29.50 and hold it for more than a day, we could see a turnaround.

I am finding that the last of the super bears are crossing to the other side of the road. Now that is something to really worry about! When all the bears turn bullish, who is left to buy?

But while there are so many concerns out there about the overall market, one of the indices in the US that took my eye was their Oil Index. Looks like it wants to break topside. If it does, does this mean that the rest of the market will follow – see what I mean about conflicting signals! But I also have been looking at Santos and Woodside – probably two of the worst performing stocks I follow. Both showed some life last week and looked like they are trying to break out of interesting looking base patterns. Our Energy Index is where it was in 2006. Had a huge rise from 2003 and quintupled before it finally topped in 2007. Unfortunately such a big rise has led to an extended period of indigestion to work off that over-exuberance. Haven’t had time to explore other possibilities in this sector but feed-back very welcome.

Banking Index up fifteen weeks in a row – all the way from the November,2012,low. Hard pushed to find anything to match that.

And at the end of another week, I am going to make the lame comment that I need a bit more time to see everything clearly. Mind you be prepared for dramatics whichever way it all goes.