August 31st 2013: If the US dollar goes higher, where does everything else go?

Hint:  Lower.

Once again, there's not a shortage of things to talk about this week.  In no particular order, we could talk about:

1) Small-caps breaking down  ($SML)
2) Mid-caps breaking down ($MID)
3) Europe rolling over hard after displaying RS
4) The big moves in the $VIX and loosely-related ETF cousins (VXX, XIV)
5) The persistent weakness in the $INDU's and $TRAN
6) The stubborn stickiness of the $NDX (QQQ) and its resistance to rolling over

But I don't have time to write 6 additional blog posts, so I'm just going to pick the most important one:  $USD/UUP

Let's take UUP as a proxy for the $USD since I can easily get volume and it's easier to see the trends.

On the bull side of the ledger, we have:
1) Higher low and higher high on the daily chart of UUP
2) Down-trend appears broken on the weekly chart with a close above previous week's high @ 22.07
3) Elder Impulse Bars turned blue (neutral) and stayed blue after weeks of being red.
4) Price closed above 5-week EMA
5) FORCE(2) is green and trending up
6) FORCE(2) on the downside was light as price was testing previous lows @ 21.82-22
7) Price bounced off clear support at 21.82-22

On the bear side, we have:
1) Weak volume
2) Price is below 10w SMA
3) Bearish 5w EMA x 10w SMA cross still in play
4) Price is below Chandelier Stop line (10,2)

I can sort of wave away the downside arguments as being symptomatic of being early in the trade.  If the UUP starts ripping higher, I would expect the other indicators to catch up.  If we break 21.82, then clearly something went wrong with my thesis.

Overall, the bullish aspects of a UUP long trade have much more appeal and we could easily see the top of the recent range at 22.94.  We've been in a range of 21.50 to 23 for almost 2 years on the UUP, so a move higher within that range is certainly within the realm of possibilities.  In fact, you could argue that it's just normal chop within a box (range).

So, what does a $1.50 pop in UUP mean for the rest of the world?  My take is that it means a great deal for commodities, stocks - and emerging markets specifically, and even the stubbornly sticky QQQ.

If you're only going to look at 1 chart every day, this would be a good one to watch.

Here's the chart:

For more charts and to see a disclaimer, please read my public charts at stockcharts.com:

http://stockcharts.com/public/1109955

August 18th 2013: Is junk the new high-beta?

We could talk about alot of things this week:
1) The continued dramatic weakness in commercial real estate (something I flagged last time)
2) The amazing run that AAPL has had lately pushing prices back to pre-2013 levels and buoying the Q's (see older post for my take on AAPL as it starting to turn)
3) The big push higher in GDX (also something that I flagged earlier)

But that's all old news.

What was most surprising to me this week was the relative outperformance of Europe while the SPY's were breaking down - especially Italy.  Yes, Italy.  The country that the media would have had you to believe was going to take down Europe and by extension kill the nascent recovery in the US, speed China's demise, and send the world into global economic recession.  That Italy!  (I try to avoid reading the news because it's misleading [at best], but sometimes a little bit of news slips in).

Here's what I see from the chart...
1) Price is breaking out of a box.
2)  MA's are trending up.
3) Price is above the Chandelier Exit Line
4) Elder Impuse Bars are green
5) RSI(2) is 99+
6) FORCE(2) is green

Pretty impressive stuff!  The only negatives that I see is the lower peak in FORCE (vs. the April surge) which is due to the below average volume.  This could be a seasonal issue as I understand that EVERYONE in Italy is on vacation in August (which makes me wonder how anything gets done...).

I'd rather not be long Italy because of political risk, but VGK and EZU are two strong Europe-based ETFs that are also outperforming vs. the $SPX.  It's a very interesting divergence to see Europe leading the US when so often it's been pulling the US indexes down.  I would expect Europe to lead again once the SPY's recover.

Another aspect to consider is that junk is leading now simply because of rotation.  Gold miners, Italy, and other chronic underperformers are suddenly getting a bid.  Regardless of the reasons, the important part is that they are moving higher.

Here's the chart...

For more charts (and less commentary), please visit my public chart list on Stockcharts.com.  Also check out the disclaimer there.
http://stockcharts.com/public/1109955

August 4th 2013: Shades of 2007 in Commercial Real Estate?

Starting in 2007, commercial real estate (IYR) started vastly underperforming the ($SPX/SPY's).  Then, there was a big rebound off the March 2009 bottom after China bottomed in late 2008 with real estate leading, both in terms of relative performance and absolute returns.  And now we're seeing IYR leading to the downside again.

I like paying attention to price performance rather than opinions.  I'm sure there's lots of smart people jumping up and down and saying to buy or sell IYR right now based on some well-though-out, cogent arguments.  The trouble is that someone is wrong and I'm not clever enough to know which well-educated person is correct.  On the other hand, stock prices are always correct in the sense that they reflect matched prices for buyers and sellers at a particular moment in time, but I digress...

Here's what I see:  for whatever important reason, IYR is heading down and dramatically underperforming the SPY's as the SPY's are reaching all-time highs.  This week, not only did IYR fail to break out of a potential flag pattern, it broke down below MA support lines and the chandelier exit line.  In doing so, it appears headed for the bottom of the blue box @ $62.72.  If $62.72 should fail, there is a large inverse cup & handle bearish pattern which, if completed, would send prices much, much lower.  The only mild positives are that volume came in just above average and FORCE is still less than the June lows.

Good luck out there and may the FORCE index be with you in your trades.

For more charts and a disclaimer, please see my public chart list on stockcharts.com.

http://stockcharts.com/public/1109955