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Intraday Breakdown in Dollar index Hourly Structure

December 13th, 2010

We’re seeing a big move down this morning in the US Dollar Index (and by proxy, a move UP in the EUR/USD FOREX Pair).

Let’s take a quick look at the Hourly Structure and see how this is playing out and what to watch next.

In this week’s Inter-market Report to subscribers, I wrote of the potential for a Bear Flag formation in the hourly Dollar Index (showing a chart very similar to this).

That was the dominant play with the alternate play being a bullish break above the $80.50 level … which is now off the table.

This morning triggered potential entry at two distinct levels for short-term traders.

First, the mini-trendline breakdown exactly at the $80 level, and more importantly, the second trendline – the actual “flag trendline” – breakdown just above $79.50.

As long as the index remains under the $79.50 level, it puts it within the potential Bear Flag pattern, also called an “AB=CD” or “Measured Move” pattern, which gives a Price-Pattern Projection Target down to the $78 region.

That’s what we’ll be watching as the days go on – a completion of this potential pattern targets $78.

Watch initially for a possible pause/support of the pure price swing lows at $79.20 and $79.10 respectively – or to be ‘really’ safe, look to see if the $79 index level breaks soon.

The corresponding level to watch for a breakdown confirmation in UUP is roughly $22.85.  As I type, it looks like it’s trying to support there, but watch closely for a breakdown under there.

As a reminder, if this does wind up to be a Bear Flag pattern, expect a similar “measured move” of the initial impulse that began the flag, which is the time-period from the November 30 peak to the December 5th low in a similar move, which is roughly $2.30 on the Index.

This pattern would likely fail if the index strengthened suddenly back above $80, which is probably where traders will place stops.

And for those who love divergences, take some time to look at the divergences I labeled with respective index price highs along the way.

As a standard caveat, watch price levels extremely closely for signs of confirmation/non-confirmation on the way to an expected price target, especially on the fast-changing intraday charts.

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter:  http://twitter.com/afraidtotrade

Read more here:
Intraday Breakdown in Dollar index Hourly Structure

Uncategorized

Intraday Breakdown in Dollar index Hourly Structure

December 13th, 2010

We’re seeing a big move down this morning in the US Dollar Index (and by proxy, a move UP in the EUR/USD FOREX Pair).

Let’s take a quick look at the Hourly Structure and see how this is playing out and what to watch next.

In this week’s Inter-market Report to subscribers, I wrote of the potential for a Bear Flag formation in the hourly Dollar Index (showing a chart very similar to this).

That was the dominant play with the alternate play being a bullish break above the $80.50 level … which is now off the table.

This morning triggered potential entry at two distinct levels for short-term traders.

First, the mini-trendline breakdown exactly at the $80 level, and more importantly, the second trendline – the actual “flag trendline” – breakdown just above $79.50.

As long as the index remains under the $79.50 level, it puts it within the potential Bear Flag pattern, also called an “AB=CD” or “Measured Move” pattern, which gives a Price-Pattern Projection Target down to the $78 region.

That’s what we’ll be watching as the days go on – a completion of this potential pattern targets $78.

Watch initially for a possible pause/support of the pure price swing lows at $79.20 and $79.10 respectively – or to be ‘really’ safe, look to see if the $79 index level breaks soon.

The corresponding level to watch for a breakdown confirmation in UUP is roughly $22.85.  As I type, it looks like it’s trying to support there, but watch closely for a breakdown under there.

As a reminder, if this does wind up to be a Bear Flag pattern, expect a similar “measured move” of the initial impulse that began the flag, which is the time-period from the November 30 peak to the December 5th low in a similar move, which is roughly $2.30 on the Index.

This pattern would likely fail if the index strengthened suddenly back above $80, which is probably where traders will place stops.

And for those who love divergences, take some time to look at the divergences I labeled with respective index price highs along the way.

As a standard caveat, watch price levels extremely closely for signs of confirmation/non-confirmation on the way to an expected price target, especially on the fast-changing intraday charts.

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter:  http://twitter.com/afraidtotrade

Read more here:
Intraday Breakdown in Dollar index Hourly Structure

Uncategorized

Chinese Inflation and Economic Growth Soar

December 13th, 2010

Well, the pause for the cause by US Treasury yields, lasted but one North American trading session on Friday… The 10-year yield has jumped higher once again this morning, all the way to 3.35%!!! WOW! Once again, I wonder aloud if the Treasury Bubble that I’ve cried wolf about for three years, is coming to fruition, or… Is this just another head fake, that will be corrected once the FOMC begins to really pull the trigger on their quantitative easing…

Speaking of quantitative easing (QE)… The Big Boss, Frank Trotter, sent me a note on Friday that plays well with this line of discussion on QE…

The latest round of quantitative easing (QE2) has left Cato Vice President for Academic Affairs James A. Dorn (who also edits Cato Journal) perplexed, as he wrote this week in Investor’s Business Daily, “The attempt to reduce unemployment by artificially lowering longer-term interest rates on government debt, increasing the appetite for risk and moving inflation expectations closer to the Fed’s target of 2% is being driven by the Fed’s ‘dual mandate’… Monetary stimulus doesn’t create jobs or economic growth, but does increase government power and reduce individual freedom.”

OK… I guess we know where the Vice President for Academic Affairs at the Cato Institute stands with regards to QE, eh? I wish I had said that, because I would go around the country telling people!

So… The currencies pretty much traded in a tight range on Friday, with the euro (EUR) hanging on to the 1.32 handle, but barely… The same goes for this morning… The precious metals of gold and silver got whacked again on Friday, after recovering on Thursday. Friday morning I told you that gold was nearing $1,400 an once again, but then the rug was pulled from under the shiny metal… But, there’s a good sign this morning, with gold up $4, and silver up 50-cents.

Well… I’m going to gloat a bit this morning… No worries, I’ll stop patting myself on the back before the bursitis kicks in! What am I blowing the horn about you ask? Well… Seems that China’s economy not only did not collapse like many pundits and economists were telling you six months ago… Instead, China’s economy is still kicking tail and taking names! Friday, we saw both inflation and economic growth in two reports that must have those same pundits and economists trying to find cover to hide under right now…

Here’s the skinny… Chinese inflation (CPI) rose 5.1% in November, with food prices rising the most (sound familiar to here in the US? It should!). On the economic growth chart, both retail sales and industrial production beat estimates… Retail sales grew 18.7% in November, while industrial production soared 13.3%… Now… Where are all those guys? I told you, dear reader… These guys didn’t know what was going on in China, and this proves it… I also told you that China was merely trying to slow down or moderate their economy, not shut it down, and again, these data prints prove that point too!

So… Here’s what to expect next in China… Interest rates are going to have to be raised, and not a moment too soon! And… Reserve requirements will be raised again too! And once again, we’ll hear the calls for a collapse of the Chinese economy… And… Those calls will hit the pressure points of commodities/risk assets/and the currencies that enjoy their trading relationship with China (read Australia)… But I wouldn’t let this get in the way of your thoughts to own these currencies or commodities, because as the past shows us… They get beaten down when the so-called experts spout off about China’s economy slowing down… And then recover and rally, as those naysayer thoughts fade…

In fact, it’s already beginning, as I saw a blurb go over the screens this morning about the Aussie dollar (AUD) weakening as, “China signals tightening to curb inflation”…

The trade deficit for October here in the US narrowed to $38.7 billion, from a $44.6 billion in September… Let me also remind you that during October, the dollar was getting sold like funnel cakes at a State Fair, and it wasn’t until the middle of November that Ireland’s problems were brought to light by the media, and the dollar recovered… I know, I’ll have some gear-head tell me that it takes months for a weak dollar to show up in a trade report… I don’t buy it…not any longer!

So… You have to be careful what you wish for… If you want to see this trade deficit continue to narrow, the dollar has to remain under pressure… The deficit that should have offset the narrowing of the trade deficit, was the Monthly Budget Deficit, which posted a much larger than expected monthly figure of $150.4 billion for the month of November… What? Did we hold some parties or something? I mean the experts forecast the budget deficit to be $138 billion, but it was $150 billion?

Annualize that monthly total… You get an annual budget deficit of $1.8 trillion! OK… I know, it can’t possibly end up that high! Could it? Well… Nothing would surprise me these days… Nothing!

Tomorrow, the FOMC will meet… And I would think that this meeting will be one of the least watched and have the least amount of pressure on Big Ben Bernanke in quite some time… Big Ben basically already told us that the Bernank could end up buying more than $600 billion in their quantitative easing… So, what else could the Bernank tell us tomorrow?

We’ll also see retail sales for November, tomorrow… and I would have to say that not only is the Butler Household Index (BHI) flashing strong signals for a strong number, but… Remember, gasoline sales are a part of retail sales… And what have I been telling you for over a month now? That oil prices were rising… And if oil prices are rising, gas prices are rising, and if gas prices are rising, retail sales are rising!

OK… Enough with the data for tomorrow… The data cupboard is empty today…

I see where the negotiations for a plan to deal with Eurozone debt, are quite chilly too! I was telling the boys and girls on the desk, on Friday, that I think that the Eurozone should go to a “Eurozone Bond” issued by the whole lot… It would decrease the interest rate that the periphery countries would have to pay, and raise the interest rate that Germany, Holland, Austria, and France would have to pay, but wouldn’t that be better than having to come to the rescue of these periphery countries? And isn’t the goal to keep the Eurozone intact, so that the 50% of Germany’s exports that now cross Eurozone borders without delay, added costs, and problems, continue? I think so!

But… Germany is against the “Eurozone bond” idea… Hmm… I think they are not seeing this problem in the proper light… Anyway… The EU summit will conclude on Thursday this week, and we’ll have to wait till then to see what direction the Eurozone Finance Ministers are going to take…

Personally, I think they are going to come out with a debt-crisis facility… But it won’t be as large as the IMF would like it to be… And that’s going to lead to the IMF offering to help… (The EU should run from the IMF as fast as they can… I’m reminded of President Reagan’s famous line about the scariest words that can be heard are, “I’m from the Government, and I’m here to help”… Just plug in the IMF for the word Government…)

German Finance Minister Wolfgang Schaeuble issued a warning on Sunday to financial markets that it would be a mistake to bet against the euro. Addressing speculation that debt crises in Europe could bring down the currency, Schaeuble said European Union member states were committed to defending the euro.

“Whoever bets his money against the euro will not succeed,” Schaeuble told the German Sunday newspaper Bild am Sonntag this weekend.

Hmmm… It’s about time someone from the Eurozone stood up for the euro! I would really have liked for Schaeuble to mention intervention… Now, that would be pulling a page right out of Robert Rubin’s strong dollar policy book… But… He didn’t… But… Hopefully, he’ll lather, rinse, and repeat these words over and over again, to get the markets to take notice, and call off the dogs on the euro.

The FOMC isn’t the only central bank meeting this week… We have the central banks in Sweden, Norway and Switzerland meeting this week… Norway’s Norges Bank, and the Swiss National Bank are not expected to raise rates… Sweden’s Riksbank is on the rate hike fence and needs a nudge… I think the Riksbank will hike rates this week by 25 BPS (1/4%). I’ve said this for some time now, and the time is finally here… So come on Riksbank, don’t fail me now! HA!

I believe that the Norges Bank is on hold for another rate hike until the second quarter of 2011… Hopefully the Norges Bank proves me wrong and hikes rates in the first quarter!

For today… I’m expecting a bit of a recovery for the currencies and precious metals, due to the empty data cupboard here in the US and the fact that China did NOT react to their dynamic duo reports of inflation and economic growth with a knee-jerk rate hike… Yes, a rate hike’s coming, but it wasn’t a knee-jerk one, that would have thrown cold water all over the risk markets this morning… Now, the markets get to get ready for the rate hike…

Then there was this… Ahhh… I see on the TV this morning that a recent poll showed that a large percentage of those surveyed were against Wall-Street Bonuses… Hmmm… All I’ll say about that is, they wouldn’t be against them if they were the recipients of the bonuses! Yes, we all do that…

To recap… The currencies traded in a tight range on Friday, with gold and silver getting sold throughout the day. China printed some very strong economic reports with soaring inflation, and retail sales along with industrial production also soaring. So much for those that called for a collapsing Chinese economy a year ago, eh? The FOMC meets this week…no drama, though… The Norges Bank, Swiss National Bank, and Riksbank all meet this week, with only the Riksbank having a rate hike possibility. And Treasury yields are on the rise again… Is this the popping of the Treasury bubble?

Chuck Butler
for The Daily Reckoning

Chinese Inflation and Economic Growth Soar originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

Read more here:
Chinese Inflation and Economic Growth Soar




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Commodities, Uncategorized

Chinese Inflation and Economic Growth Soar

December 13th, 2010

Well, the pause for the cause by US Treasury yields, lasted but one North American trading session on Friday… The 10-year yield has jumped higher once again this morning, all the way to 3.35%!!! WOW! Once again, I wonder aloud if the Treasury Bubble that I’ve cried wolf about for three years, is coming to fruition, or… Is this just another head fake, that will be corrected once the FOMC begins to really pull the trigger on their quantitative easing…

Speaking of quantitative easing (QE)… The Big Boss, Frank Trotter, sent me a note on Friday that plays well with this line of discussion on QE…

The latest round of quantitative easing (QE2) has left Cato Vice President for Academic Affairs James A. Dorn (who also edits Cato Journal) perplexed, as he wrote this week in Investor’s Business Daily, “The attempt to reduce unemployment by artificially lowering longer-term interest rates on government debt, increasing the appetite for risk and moving inflation expectations closer to the Fed’s target of 2% is being driven by the Fed’s ‘dual mandate’… Monetary stimulus doesn’t create jobs or economic growth, but does increase government power and reduce individual freedom.”

OK… I guess we know where the Vice President for Academic Affairs at the Cato Institute stands with regards to QE, eh? I wish I had said that, because I would go around the country telling people!

So… The currencies pretty much traded in a tight range on Friday, with the euro (EUR) hanging on to the 1.32 handle, but barely… The same goes for this morning… The precious metals of gold and silver got whacked again on Friday, after recovering on Thursday. Friday morning I told you that gold was nearing $1,400 an once again, but then the rug was pulled from under the shiny metal… But, there’s a good sign this morning, with gold up $4, and silver up 50-cents.

Well… I’m going to gloat a bit this morning… No worries, I’ll stop patting myself on the back before the bursitis kicks in! What am I blowing the horn about you ask? Well… Seems that China’s economy not only did not collapse like many pundits and economists were telling you six months ago… Instead, China’s economy is still kicking tail and taking names! Friday, we saw both inflation and economic growth in two reports that must have those same pundits and economists trying to find cover to hide under right now…

Here’s the skinny… Chinese inflation (CPI) rose 5.1% in November, with food prices rising the most (sound familiar to here in the US? It should!). On the economic growth chart, both retail sales and industrial production beat estimates… Retail sales grew 18.7% in November, while industrial production soared 13.3%… Now… Where are all those guys? I told you, dear reader… These guys didn’t know what was going on in China, and this proves it… I also told you that China was merely trying to slow down or moderate their economy, not shut it down, and again, these data prints prove that point too!

So… Here’s what to expect next in China… Interest rates are going to have to be raised, and not a moment too soon! And… Reserve requirements will be raised again too! And once again, we’ll hear the calls for a collapse of the Chinese economy… And… Those calls will hit the pressure points of commodities/risk assets/and the currencies that enjoy their trading relationship with China (read Australia)… But I wouldn’t let this get in the way of your thoughts to own these currencies or commodities, because as the past shows us… They get beaten down when the so-called experts spout off about China’s economy slowing down… And then recover and rally, as those naysayer thoughts fade…

In fact, it’s already beginning, as I saw a blurb go over the screens this morning about the Aussie dollar (AUD) weakening as, “China signals tightening to curb inflation”…

The trade deficit for October here in the US narrowed to $38.7 billion, from a $44.6 billion in September… Let me also remind you that during October, the dollar was getting sold like funnel cakes at a State Fair, and it wasn’t until the middle of November that Ireland’s problems were brought to light by the media, and the dollar recovered… I know, I’ll have some gear-head tell me that it takes months for a weak dollar to show up in a trade report… I don’t buy it…not any longer!

So… You have to be careful what you wish for… If you want to see this trade deficit continue to narrow, the dollar has to remain under pressure… The deficit that should have offset the narrowing of the trade deficit, was the Monthly Budget Deficit, which posted a much larger than expected monthly figure of $150.4 billion for the month of November… What? Did we hold some parties or something? I mean the experts forecast the budget deficit to be $138 billion, but it was $150 billion?

Annualize that monthly total… You get an annual budget deficit of $1.8 trillion! OK… I know, it can’t possibly end up that high! Could it? Well… Nothing would surprise me these days… Nothing!

Tomorrow, the FOMC will meet… And I would think that this meeting will be one of the least watched and have the least amount of pressure on Big Ben Bernanke in quite some time… Big Ben basically already told us that the Bernank could end up buying more than $600 billion in their quantitative easing… So, what else could the Bernank tell us tomorrow?

We’ll also see retail sales for November, tomorrow… and I would have to say that not only is the Butler Household Index (BHI) flashing strong signals for a strong number, but… Remember, gasoline sales are a part of retail sales… And what have I been telling you for over a month now? That oil prices were rising… And if oil prices are rising, gas prices are rising, and if gas prices are rising, retail sales are rising!

OK… Enough with the data for tomorrow… The data cupboard is empty today…

I see where the negotiations for a plan to deal with Eurozone debt, are quite chilly too! I was telling the boys and girls on the desk, on Friday, that I think that the Eurozone should go to a “Eurozone Bond” issued by the whole lot… It would decrease the interest rate that the periphery countries would have to pay, and raise the interest rate that Germany, Holland, Austria, and France would have to pay, but wouldn’t that be better than having to come to the rescue of these periphery countries? And isn’t the goal to keep the Eurozone intact, so that the 50% of Germany’s exports that now cross Eurozone borders without delay, added costs, and problems, continue? I think so!

But… Germany is against the “Eurozone bond” idea… Hmm… I think they are not seeing this problem in the proper light… Anyway… The EU summit will conclude on Thursday this week, and we’ll have to wait till then to see what direction the Eurozone Finance Ministers are going to take…

Personally, I think they are going to come out with a debt-crisis facility… But it won’t be as large as the IMF would like it to be… And that’s going to lead to the IMF offering to help… (The EU should run from the IMF as fast as they can… I’m reminded of President Reagan’s famous line about the scariest words that can be heard are, “I’m from the Government, and I’m here to help”… Just plug in the IMF for the word Government…)

German Finance Minister Wolfgang Schaeuble issued a warning on Sunday to financial markets that it would be a mistake to bet against the euro. Addressing speculation that debt crises in Europe could bring down the currency, Schaeuble said European Union member states were committed to defending the euro.

“Whoever bets his money against the euro will not succeed,” Schaeuble told the German Sunday newspaper Bild am Sonntag this weekend.

Hmmm… It’s about time someone from the Eurozone stood up for the euro! I would really have liked for Schaeuble to mention intervention… Now, that would be pulling a page right out of Robert Rubin’s strong dollar policy book… But… He didn’t… But… Hopefully, he’ll lather, rinse, and repeat these words over and over again, to get the markets to take notice, and call off the dogs on the euro.

The FOMC isn’t the only central bank meeting this week… We have the central banks in Sweden, Norway and Switzerland meeting this week… Norway’s Norges Bank, and the Swiss National Bank are not expected to raise rates… Sweden’s Riksbank is on the rate hike fence and needs a nudge… I think the Riksbank will hike rates this week by 25 BPS (1/4%). I’ve said this for some time now, and the time is finally here… So come on Riksbank, don’t fail me now! HA!

I believe that the Norges Bank is on hold for another rate hike until the second quarter of 2011… Hopefully the Norges Bank proves me wrong and hikes rates in the first quarter!

For today… I’m expecting a bit of a recovery for the currencies and precious metals, due to the empty data cupboard here in the US and the fact that China did NOT react to their dynamic duo reports of inflation and economic growth with a knee-jerk rate hike… Yes, a rate hike’s coming, but it wasn’t a knee-jerk one, that would have thrown cold water all over the risk markets this morning… Now, the markets get to get ready for the rate hike…

Then there was this… Ahhh… I see on the TV this morning that a recent poll showed that a large percentage of those surveyed were against Wall-Street Bonuses… Hmmm… All I’ll say about that is, they wouldn’t be against them if they were the recipients of the bonuses! Yes, we all do that…

To recap… The currencies traded in a tight range on Friday, with gold and silver getting sold throughout the day. China printed some very strong economic reports with soaring inflation, and retail sales along with industrial production also soaring. So much for those that called for a collapsing Chinese economy a year ago, eh? The FOMC meets this week…no drama, though… The Norges Bank, Swiss National Bank, and Riksbank all meet this week, with only the Riksbank having a rate hike possibility. And Treasury yields are on the rise again… Is this the popping of the Treasury bubble?

Chuck Butler
for The Daily Reckoning

Chinese Inflation and Economic Growth Soar originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

Read more here:
Chinese Inflation and Economic Growth Soar




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Commodities, Uncategorized

Breakout Level and Chart for SNDK Daily and Weekly Lessons

December 13th, 2010

Sandisk (SNDK) has been an interesting stock and is currently knocking at – or perhaps breaking through – key overhead resistance at the $50 per share level.

Let’s take a look at the current chart picture, note key levels to watch, and the dominant larger-scale “IF/THEN” logic to monitor as the weeks go on from here.

First, SNDK’s Weekly Chart:

Cutting right to the chase, a breakout firmly (for more than a day or two) above the key resistance at $50 could lead to a trend continuation move to the NEXT level of resistance at $60 per share.

The $60 per share level is as simple resistance as it gets – a prior price level from 2007’s high.

Based on the weekly structure, there’s not much above $50 that could cause a change in the supply/demand relationship, at least from the perspective of the pure price chart until the prior level comes into play.

Take a quick look at how this logic has worked in the past from 2009 to present.

After the Multi-Swing Divergence and the lows in 2008, price broke through the 50 week EMA – a key turning point in the weekly trend structure – in July 2009, locking in a breakout and new uptrend classification.

From there, price stagnated at the $27 level, which was the prior price swing high from September 2008.

After firmly breaking that level, the chart gave a clear pathway to target the next prior swing high at the $33 level from the May 2008 high.

Sellers stepped in initially here, as the $33 level converged with the falling 200 week SMA which resulted in a quick pullback to the rising 20 week EMA at $25 (a good spot to enter long).

Soon after, buyers pushed shares up through the resistance level, which cleared the way for ‘theoretically unlimited’ upside potential (as in, no really obvious overhead levels.

Price formed a negative divergence and infamous “Three Push” pattern at the $50 per share level in June 2010 then retracted all the way down to the rising 50 week EMA at $35, which happened to correspond both with the May 2008 high and January 2010 high.

Remember – often times OLD resistance becomes NEW support in the future.

Anyway – that’s a brief, guided history of price as it reacted to key swing highs/levels in the past on its journey up.

If history repeats and buyers firmly push price beyond $50, the next upside level could come in at $60 per share.

A bit of caution – notice the little negative divergences in both volume and momentum … it’s something to watch as a non-confirmation, but price trumps indicators in strong uptrends.

Let’s turn now to a quick glimpse at the Daily Chart to see some recent history:

Price formed and then broke a symmetrical triangle (that’s ’stretching’ it) recently in November and then shot-up to challenge the prior swing high at $50 per share.

Today, buyers pushed SNDK above $50 to a new 52-week high (and technically new three-year high… not seen since October 2007).

It’s now the buyers/bulls’ game to lose as price has cleared a resistance level.

We still see the negative volume and momentum divergence (notice the similar divergences that preceded the decline from June to September) with price which is a caution signal – but that’s the same pattern showing up in the broader market and NASDAQ index.

Traders keep focused on $50, with a likely bullish stance above, neutral/cautious stance under and if price really does start breaking out here, look for the next weekly resistance level to appear near $60 per share.

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter:  http://twitter.com/afraidtotrade

Read more here:
Breakout Level and Chart for SNDK Daily and Weekly Lessons

Uncategorized

Breakout Level and Chart for SNDK Daily and Weekly Lessons

December 13th, 2010

Sandisk (SNDK) has been an interesting stock and is currently knocking at – or perhaps breaking through – key overhead resistance at the $50 per share level.

Let’s take a look at the current chart picture, note key levels to watch, and the dominant larger-scale “IF/THEN” logic to monitor as the weeks go on from here.

First, SNDK’s Weekly Chart:

Cutting right to the chase, a breakout firmly (for more than a day or two) above the key resistance at $50 could lead to a trend continuation move to the NEXT level of resistance at $60 per share.

The $60 per share level is as simple resistance as it gets – a prior price level from 2007’s high.

Based on the weekly structure, there’s not much above $50 that could cause a change in the supply/demand relationship, at least from the perspective of the pure price chart until the prior level comes into play.

Take a quick look at how this logic has worked in the past from 2009 to present.

After the Multi-Swing Divergence and the lows in 2008, price broke through the 50 week EMA – a key turning point in the weekly trend structure – in July 2009, locking in a breakout and new uptrend classification.

From there, price stagnated at the $27 level, which was the prior price swing high from September 2008.

After firmly breaking that level, the chart gave a clear pathway to target the next prior swing high at the $33 level from the May 2008 high.

Sellers stepped in initially here, as the $33 level converged with the falling 200 week SMA which resulted in a quick pullback to the rising 20 week EMA at $25 (a good spot to enter long).

Soon after, buyers pushed shares up through the resistance level, which cleared the way for ‘theoretically unlimited’ upside potential (as in, no really obvious overhead levels.

Price formed a negative divergence and infamous “Three Push” pattern at the $50 per share level in June 2010 then retracted all the way down to the rising 50 week EMA at $35, which happened to correspond both with the May 2008 high and January 2010 high.

Remember – often times OLD resistance becomes NEW support in the future.

Anyway – that’s a brief, guided history of price as it reacted to key swing highs/levels in the past on its journey up.

If history repeats and buyers firmly push price beyond $50, the next upside level could come in at $60 per share.

A bit of caution – notice the little negative divergences in both volume and momentum … it’s something to watch as a non-confirmation, but price trumps indicators in strong uptrends.

Let’s turn now to a quick glimpse at the Daily Chart to see some recent history:

Price formed and then broke a symmetrical triangle (that’s ’stretching’ it) recently in November and then shot-up to challenge the prior swing high at $50 per share.

Today, buyers pushed SNDK above $50 to a new 52-week high (and technically new three-year high… not seen since October 2007).

It’s now the buyers/bulls’ game to lose as price has cleared a resistance level.

We still see the negative volume and momentum divergence (notice the similar divergences that preceded the decline from June to September) with price which is a caution signal – but that’s the same pattern showing up in the broader market and NASDAQ index.

Traders keep focused on $50, with a likely bullish stance above, neutral/cautious stance under and if price really does start breaking out here, look for the next weekly resistance level to appear near $60 per share.

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter:  http://twitter.com/afraidtotrade

Read more here:
Breakout Level and Chart for SNDK Daily and Weekly Lessons

Uncategorized

Weiss Ratings: Paramount Bank and Earthstar Bank First Recognized as “Weak” by Weiss More Than Three Years Ago

December 13th, 2010

JUPITER, Florida (December 13, 2010) — On Friday, regulators closed two banks: Paramount Bank, Farmington Hills, Michigan and Earthstar Bank, Southampton, Pennsylvania. The total number of U.S. bank and thrift failures now stands at 151 for the year.

Paramount Bank of Farmington Hills, Michigan with assets of $269 million at June 30, 2010 had been rated E- (“Very Weak”) for the previous four quarters by Weiss Ratings and was first identified as “Weak” in June 2007 based on the first quarter 2007 data. The bank reported a loss of $4.5 million through June 30, 2010. Paramount Bank also had below-FDIC-mandated Tier 1 (5%) and Risk-Based Capital (6%) ratios of 3.00% and 5.05%, respectively. Nonperforming loans made up 7.7% of its loan portfolio with charge offs at 3.21% of average loans for the quarter ended June 30, 2010.

Earthstar Bank of Southampton, Pennsylvania, north of Philadelphia, with assets of $121 million as of June 30, 2010 had been rated E- (“Very Weak”) for the last six quarters by Weiss Ratings and was first identified as “Weak” in July 2006 based on first quarter 2006 data. The bank reported a loss of $0.7 million through June 30, 2010. Earthstar had weakening capital ratios that were well below FDIC-acceptable levels and well below its peers with Tier 1 Capital at 2.33% and Risk-Based Capital of 4.79% through the second quarter of 2010. Nonperforming loans represented 12% of its loan portfolio.

Weiss Ratings, the nation’s independent provider of bank and insurance company ratings, accepts no payments for its ratings from rated institutions. It also distributes independent ratings on the shares of thousands of publicly traded companies, mutual funds, closed-end funds and ETFs.

# # #

Read more here:
Weiss Ratings: Paramount Bank and Earthstar Bank First Recognized as “Weak” by Weiss More Than Three Years Ago

Commodities, ETF, Mutual Fund, Uncategorized

Chart of the Week: Banks on a Tear

December 13th, 2010

There were many cross-currents in the financial markets during the last week, but one of the dominant themes was the spike in Treasury yields. As expectations for interest rates move higher, the banks are also catching a bid. Long able to borrow at Bernanke-induced artificially low rates, now banks are finding better prospects on the lending side – and have the added bonus of a larger yield spread on their loans as interest rates start to climb.

These factors make banks the focal point of this week’s chart of the week. In the graphic below, note that the upper study shows banks have been consistently underperforming the S&P 500 index for the past seven months. In the last week, however, banks have shown a dramatic turnaround that has lifted KBE, the popular bank ETF, above resistance (dotted blue line) and also reversed the trend of outperforming the broader market.

As was the case in 2010, the performance of the banks will be a critical factor in the performance of the broader market in 2011. Said another way, banks will continue to be a critical barometer not just of global growth, but of the ability of various economies to deal with threats to growth, such as sovereign debt and other issues.

Related posts:

[source: StockCharts.com]
Disclosure(s): long KBE at time of writing



Read more here:
Chart of the Week: Banks on a Tear

ETF, Uncategorized

Chart of the Week: Banks on a Tear

December 13th, 2010

There were many cross-currents in the financial markets during the last week, but one of the dominant themes was the spike in Treasury yields. As expectations for interest rates move higher, the banks are also catching a bid. Long able to borrow at Bernanke-induced artificially low rates, now banks are finding better prospects on the lending side – and have the added bonus of a larger yield spread on their loans as interest rates start to climb.

These factors make banks the focal point of this week’s chart of the week. In the graphic below, note that the upper study shows banks have been consistently underperforming the S&P 500 index for the past seven months. In the last week, however, banks have shown a dramatic turnaround that has lifted KBE, the popular bank ETF, above resistance (dotted blue line) and also reversed the trend of outperforming the broader market.

As was the case in 2010, the performance of the banks will be a critical factor in the performance of the broader market in 2011. Said another way, banks will continue to be a critical barometer not just of global growth, but of the ability of various economies to deal with threats to growth, such as sovereign debt and other issues.

Related posts:

[source: StockCharts.com]
Disclosure(s): long KBE at time of writing



Read more here:
Chart of the Week: Banks on a Tear

ETF, Uncategorized

Grand Compromise or Great Conspiracy?

December 13th, 2010

Martin D. Weiss, Ph.D.

When Americans went to the polls last month, many thought they were voting for a return of fiscal sanity in Washington. And with fiscal sanity, we’d have far better assurance of bond-market stability.

Instead, three houses of ill repute — two on Capitol Hill and one on Pennsylvania Avenue — are joining to deliver one of the most wanton, deficit-busting, bond-wrecking bills of all time.

What most people seem to overlook is that there are actually two bills in the works. There’s the bill Congress will pass this year. And there’s the bill you and I will have to pay next year, the year after, and perhaps till the day we die.

President Obama and the Republican leadership are calling it a “grand compromise to stimulate the economy.”

In reality, it’s little more than a great conspiracy to slaughter our nation’s finances.

The sad irony is that nearly all key decision-makers in Washington — including some you and I may have voted for — are feasting on the spoils:

  • The Republican leadership is getting the biggest prize — the extension of all Bush-era tax cuts.
  • The White House is walking away with its own choice morsels — a 13-month extension of unemployment benefits, a major cut in payroll taxes, and more.
  • And even rebellious Democrats are rebelling with a goal: To get a few leftovers for themselves as well.

Nearly every leader in Washington has blood-red ink on his hands!

None of the deal-makers have assumed responsibility for our future or our children’s future!

The Biggest Self-Deceptions of All Time

Let’s step back for a moment and review how we got here.

Shortly after the failure of Lehman Brothers in 2008, I participated in a Washington forum of decision-makers and opinion leaders, including Treasury Secretary Tim Geithner, former Fed Chairman Paul Volcker, financier George Soros, and a long list of others of similar distinction.

As you may recall, that was a time of peak tension and fear — when the world’s largest financial institutions were going bankrupt, when the government was scrambling to bail them out, and when the Fed was pumping trillions of dollars of hard money and guarantees into collapsing credit markets.

Plus, it was also a time when many people spoke more openly about their concerns and fears:

During dinner, Tim Geithner admitted to the group that the government’s measures were among the most extreme in history.

After dinner, George Soros told me that the government’s intervention was so massive, it risked hyperinflation.

Between workshops, Paul Volcker told me that he never dreamed the U.S. government would have to take all the steps it had taken to prevent a collapse.

Yet no matter how risky and how radical, everyone at the conference justified the government’s actions as “a necessary evil.”

Their rationale: The debt crisis required a two-step response …

First, they said, we had to save the system. Then, only later could we start fixing the system.

First, they argued, we had to accept trillion-dollar deficits. Then, only later could we figure out how to reduce the deficits.

I was the lone dissenter. I repeatedly declared — both in open forums and in private conversations — that …

“The distinction you are making between the present emergency and a future solution is a fiction, an illusion. The only time to do the right thing is right now. You cannot honestly promise to make all the right choices tomorrow, while consistently deciding to make all the wrong choices today.”

In principle, no one disagreed. But in practice, no one else dissented.

In fact, every forum participant was asked to vote by choosing among various new proposals to resolve the crisis. But all of the proposals assumed that the government’s role to bail out the system was indisputable. None of the proposals recognized the fiction I had articulated.

So in the final vote tally, there was only one abstention — mine.

And, unfortunately, this forum was merely a microcosm of what we’ve witnessed since the first day of this crisis …

Rampant, Blatant Discrepancies
Between Their Actions and Words

We see the same pattern in the White House and at the Office of Management and Budget (OMB) … in Congress and at Congressional Budget Office (CBO) … among Democrats and Republicans … among deficit apologists and, often, even so-called “deficit hawks.”

For the current or upcoming fiscal years, the red ink is undeniable. So their budget estimates have routinely admitted the enormity of the deficits.

But as soon as they look beyond the immediate horizon, they have invariably projected deficits that conveniently dwindle over time.

And the underlying message has always been the same:

“Yes, we know we’re trashing the budget this year. But don’t worry. We promise to fix it in future years.”

History, however, proves that such promises are literally emptier than a banker’s heart.

For example, in its Baseline Budget Projections of September 2008

  • The CBO estimated that the federal deficit for fiscal 2009 would be $438 billion. The actual deficit for 2009 was $1.4 trillion, or over TRIPLE the estimate made just one year prior.
  • At the same time, for 2010, the CBO estimated that the deficit would be $431 billion. In reality, it’s coming in at $1.5 trillion, or 3.6 times estimates.
  • The government’s unbridled optimism regarding nearby years was exceeded only by its fantasies regarding future years: The CBO estimated that, by 2012, the deficit would be down to just $126 billion. Today, the official estimate is $828 billion, or over SIX times more!

What’s most frightening is that history is now repeating itself:

Today’s official government estimates of future deficits are based on the same kind of false, optimistic assumptions as the grossly understated estimates made in 2008!

They assume that the unemployment rate will decline sharply. In reality, it’s rising.

They assume that borrowing costs will stay low. In reality, they are also rising.

And most egregious of all, they have the gall to assume that someone will start doing something about the deficits very soon when, in actual practice, no one in power has any such intention.

The latest events are a classic example of this hypocrisy:

Even while the president’s bipartisan commission was testifying before Congress on the urgency of taking drastic steps to cut the deficit immediately … that same president and that same Congress were agreeing on equally drastic steps to enlarge the deficit — also immediately.

Result: The administration’s latest budget estimates are already grossly outdated! The OMB’s own data, currently still up on its website, shows that the deficit is expected to shrink from its all-time record of $1.55 trillion this year to $1.27 trillion next year.

But now, because of the new deal that Mr. Obama and Congress have just cut, the deficit is likely to balloon again next year to an estimated $1.6 trillion. And that’s STILL assuming a significant decline in unemployment!

This means that, even in the best of scenarios, our leaders are now actually planning to give us the biggest federal deficit of all time, surpassing last year’s record-smashing deficit. And they’re doing so while still giving lip service to “fiscal discipline.”

So here we go again! More budget-busting tactics … more promises of future fixes … and STILL more budget busting!

Ignoring the Grim Reaper

Don’t our leaders hear the cries of urgency and outrage from the leaders of the president’s bipartisan commission?

Don’t they even bother to read the CBO’s just-released report, Economic Impacts of Waiting to Resolve the Long-Term Budget Imbalance?

Don’t they see what’s happening to budget-busting states like California, Illinois, New Jersey, and New York?

Don’t they realize that the whole world is watching? That China, which holds the lion’s share of our Treasuries, is turning increasingly sour on the U.S. and far more willing to dump U.S. Treasuries?

Don’t they understand the shocking events in our bond market of recent days — where bond yields are now surging even as the Fed spends $600 billion to push them down?

Certainly they could not have missed the Grim Reaper who has already knocked on the doors of Greece, Ireland, Portugal, and Spain! Certainly, they must know that our nation’s finances and economy are equally vulnerable to attacks by global bond investors.

Mark my words: Because of our ballooning deficits … because of Washington’s deliberate neglect … global investors are on the verge of major bond-market selling in the days ahead.

Result: We now have all the ingredients for the worst U.S. bond and U.S. dollar disaster in recent memory.

With This Danger Hanging Over Markets,
Your Action Plan Should Be Clear …

First, get out of long-term bonds of all shapes and colors — government, corporate, or municipal … high rated or low rated.

Second, although the higher yields on U.S. Treasuries could help support the U.S. dollar for a short while, don’t expect that to last. When global investors sell, they sell both Treasuries AND dollars at the same time.

Third, any decline in the dollar is bound to be very closely correlated with rising trends in precious metals, agricultural commodities, and emerging markets. Just don’t count on any market going up in a straight line. Wait for corrections.

Good luck and God bless!

Martin

Read more here:
Grand Compromise or Great Conspiracy?

Commodities, ETF, Mutual Fund, Uncategorized

Grand Compromise or Great Conspiracy?

December 13th, 2010

Martin D. Weiss, Ph.D.

When Americans went to the polls last month, many thought they were voting for a return of fiscal sanity in Washington. And with fiscal sanity, we’d have far better assurance of bond-market stability.

Instead, three houses of ill repute — two on Capitol Hill and one on Pennsylvania Avenue — are joining to deliver one of the most wanton, deficit-busting, bond-wrecking bills of all time.

What most people seem to overlook is that there are actually two bills in the works. There’s the bill Congress will pass this year. And there’s the bill you and I will have to pay next year, the year after, and perhaps till the day we die.

President Obama and the Republican leadership are calling it a “grand compromise to stimulate the economy.”

In reality, it’s little more than a great conspiracy to slaughter our nation’s finances.

The sad irony is that nearly all key decision-makers in Washington — including some you and I may have voted for — are feasting on the spoils:

  • The Republican leadership is getting the biggest prize — the extension of all Bush-era tax cuts.
  • The White House is walking away with its own choice morsels — a 13-month extension of unemployment benefits, a major cut in payroll taxes, and more.
  • And even rebellious Democrats are rebelling with a goal: To get a few leftovers for themselves as well.

Nearly every leader in Washington has blood-red ink on his hands!

None of the deal-makers have assumed responsibility for our future or our children’s future!

The Biggest Self-Deceptions of All Time

Let’s step back for a moment and review how we got here.

Shortly after the failure of Lehman Brothers in 2008, I participated in a Washington forum of decision-makers and opinion leaders, including Treasury Secretary Tim Geithner, former Fed Chairman Paul Volcker, financier George Soros, and a long list of others of similar distinction.

As you may recall, that was a time of peak tension and fear — when the world’s largest financial institutions were going bankrupt, when the government was scrambling to bail them out, and when the Fed was pumping trillions of dollars of hard money and guarantees into collapsing credit markets.

Plus, it was also a time when many people spoke more openly about their concerns and fears:

During dinner, Tim Geithner admitted to the group that the government’s measures were among the most extreme in history.

After dinner, George Soros told me that the government’s intervention was so massive, it risked hyperinflation.

Between workshops, Paul Volcker told me that he never dreamed the U.S. government would have to take all the steps it had taken to prevent a collapse.

Yet no matter how risky and how radical, everyone at the conference justified the government’s actions as “a necessary evil.”

Their rationale: The debt crisis required a two-step response …

First, they said, we had to save the system. Then, only later could we start fixing the system.

First, they argued, we had to accept trillion-dollar deficits. Then, only later could we figure out how to reduce the deficits.

I was the lone dissenter. I repeatedly declared — both in open forums and in private conversations — that …

“The distinction you are making between the present emergency and a future solution is a fiction, an illusion. The only time to do the right thing is right now. You cannot honestly promise to make all the right choices tomorrow, while consistently deciding to make all the wrong choices today.”

In principle, no one disagreed. But in practice, no one else dissented.

In fact, every forum participant was asked to vote by choosing among various new proposals to resolve the crisis. But all of the proposals assumed that the government’s role to bail out the system was indisputable. None of the proposals recognized the fiction I had articulated.

So in the final vote tally, there was only one abstention — mine.

And, unfortunately, this forum was merely a microcosm of what we’ve witnessed since the first day of this crisis …

Rampant, Blatant Discrepancies
Between Their Actions and Words

We see the same pattern in the White House and at the Office of Management and Budget (OMB) … in Congress and at Congressional Budget Office (CBO) … among Democrats and Republicans … among deficit apologists and, often, even so-called “deficit hawks.”

For the current or upcoming fiscal years, the red ink is undeniable. So their budget estimates have routinely admitted the enormity of the deficits.

But as soon as they look beyond the immediate horizon, they have invariably projected deficits that conveniently dwindle over time.

And the underlying message has always been the same:

“Yes, we know we’re trashing the budget this year. But don’t worry. We promise to fix it in future years.”

History, however, proves that such promises are literally emptier than a banker’s heart.

For example, in its Baseline Budget Projections of September 2008

  • The CBO estimated that the federal deficit for fiscal 2009 would be $438 billion. The actual deficit for 2009 was $1.4 trillion, or over TRIPLE the estimate made just one year prior.
  • At the same time, for 2010, the CBO estimated that the deficit would be $431 billion. In reality, it’s coming in at $1.5 trillion, or 3.6 times estimates.
  • The government’s unbridled optimism regarding nearby years was exceeded only by its fantasies regarding future years: The CBO estimated that, by 2012, the deficit would be down to just $126 billion. Today, the official estimate is $828 billion, or over SIX times more!

What’s most frightening is that history is now repeating itself:

Today’s official government estimates of future deficits are based on the same kind of false, optimistic assumptions as the grossly understated estimates made in 2008!

They assume that the unemployment rate will decline sharply. In reality, it’s rising.

They assume that borrowing costs will stay low. In reality, they are also rising.

And most egregious of all, they have the gall to assume that someone will start doing something about the deficits very soon when, in actual practice, no one in power has any such intention.

The latest events are a classic example of this hypocrisy:

Even while the president’s bipartisan commission was testifying before Congress on the urgency of taking drastic steps to cut the deficit immediately … that same president and that same Congress were agreeing on equally drastic steps to enlarge the deficit — also immediately.

Result: The administration’s latest budget estimates are already grossly outdated! The OMB’s own data, currently still up on its website, shows that the deficit is expected to shrink from its all-time record of $1.55 trillion this year to $1.27 trillion next year.

But now, because of the new deal that Mr. Obama and Congress have just cut, the deficit is likely to balloon again next year to an estimated $1.6 trillion. And that’s STILL assuming a significant decline in unemployment!

This means that, even in the best of scenarios, our leaders are now actually planning to give us the biggest federal deficit of all time, surpassing last year’s record-smashing deficit. And they’re doing so while still giving lip service to “fiscal discipline.”

So here we go again! More budget-busting tactics … more promises of future fixes … and STILL more budget busting!

Ignoring the Grim Reaper

Don’t our leaders hear the cries of urgency and outrage from the leaders of the president’s bipartisan commission?

Don’t they even bother to read the CBO’s just-released report, Economic Impacts of Waiting to Resolve the Long-Term Budget Imbalance?

Don’t they see what’s happening to budget-busting states like California, Illinois, New Jersey, and New York?

Don’t they realize that the whole world is watching? That China, which holds the lion’s share of our Treasuries, is turning increasingly sour on the U.S. and far more willing to dump U.S. Treasuries?

Don’t they understand the shocking events in our bond market of recent days — where bond yields are now surging even as the Fed spends $600 billion to push them down?

Certainly they could not have missed the Grim Reaper who has already knocked on the doors of Greece, Ireland, Portugal, and Spain! Certainly, they must know that our nation’s finances and economy are equally vulnerable to attacks by global bond investors.

Mark my words: Because of our ballooning deficits … because of Washington’s deliberate neglect … global investors are on the verge of major bond-market selling in the days ahead.

Result: We now have all the ingredients for the worst U.S. bond and U.S. dollar disaster in recent memory.

With This Danger Hanging Over Markets,
Your Action Plan Should Be Clear …

First, get out of long-term bonds of all shapes and colors — government, corporate, or municipal … high rated or low rated.

Second, although the higher yields on U.S. Treasuries could help support the U.S. dollar for a short while, don’t expect that to last. When global investors sell, they sell both Treasuries AND dollars at the same time.

Third, any decline in the dollar is bound to be very closely correlated with rising trends in precious metals, agricultural commodities, and emerging markets. Just don’t count on any market going up in a straight line. Wait for corrections.

Good luck and God bless!

Martin

Read more here:
Grand Compromise or Great Conspiracy?

Commodities, ETF, Mutual Fund, Uncategorized

Guggenheim Files For Short Duration High Yield Active ETF

December 13th, 2010

Guggenheim, the parent company of Claymore, has filed a registration statement with the SEC, applying for an actively-managed short duration high yield bond ETF. The fund will be called the Guggenheim Enhanced Short Duration High Yield Bond ETF and the proposed ticker has not yet been announced. Guggenheim already has applications for two other actively-managed ETFs with the SEC – the Guggenheim Enhanced Core Bond ETF (GIY) and the Guggenheim Enhanced Ultra-Short Bond ETF (GSY).

This latest planned fund from Guggenheim will target the high yield bond market, a segment that is seeing record amounts of issuance and high demand as investors have been moving up the risk curve in their search for incremental yield. At the moment there are 4 ETFs that investors can tap on to access the high yield bond market in the US – iShares iBoxx $ HY Corp Bond Fund (HYG: 89.39 0.00%), SPDR Barclays Capital High Yield Bond ETF (JNK: 39.95 0.00%), PowerShares Fundamental High Yield Corporate Bond Portfolio (PHB: 18.15 0.00%)  and Peritus High Yield ETF (HYLD: 50.10 0.00%). Only AdvisorShares’ recently launched HYLD is actively-managed, with remaining 3 being passive ETFs. HYLD launched on Nov 30th and has since gathered $15 million in assets.

Guggenheim’s planned high yield bond fund will target the shorter end of the market and will have a duration of less than 1 year. This is a key difference from existing ETFs covering high yield bonds, most of which have effective durations ranging between 4-5 years. As such, investors wanting to access the shorter end of the high yield bond market can look to Guggenheim’s planned fund. With regards to the active management of the fund, the management process is intended to be highly flexible and responsive to market opportunities. The fund’s advisor, Guggenheim Funds Investment Advisors, will utilize a top-down approach to evaluate investment themes and relative value while using bottom-up credit research to select individual securities. The fund is allowed to invest up to 20% of the fund in bank loans as well, while limiting exposure to securities of any one issuer to 2-3%.

Day-to-day portfolio management of the fund will be done by Patrick L. Mitchell, who joined Guggenheim as a Managing Director in 2009. The proposed fee structure for the fund has not yet been disclosed.

ETF

Guggenheim Files For Short Duration High Yield Active ETF

December 13th, 2010

Guggenheim, the parent company of Claymore, has filed a registration statement with the SEC, applying for an actively-managed short duration high yield bond ETF. The fund will be called the Guggenheim Enhanced Short Duration High Yield Bond ETF and the proposed ticker has not yet been announced. Guggenheim already has applications for two other actively-managed ETFs with the SEC – the Guggenheim Enhanced Core Bond ETF (GIY) and the Guggenheim Enhanced Ultra-Short Bond ETF (GSY).

This latest planned fund from Guggenheim will target the high yield bond market, a segment that is seeing record amounts of issuance and high demand as investors have been moving up the risk curve in their search for incremental yield. At the moment there are 4 ETFs that investors can tap on to access the high yield bond market in the US – iShares iBoxx $ HY Corp Bond Fund (HYG: 89.39 0.00%), SPDR Barclays Capital High Yield Bond ETF (JNK: 39.95 0.00%), PowerShares Fundamental High Yield Corporate Bond Portfolio (PHB: 18.15 0.00%)  and Peritus High Yield ETF (HYLD: 50.10 0.00%). Only AdvisorShares’ recently launched HYLD is actively-managed, with remaining 3 being passive ETFs. HYLD launched on Nov 30th and has since gathered $15 million in assets.

Guggenheim’s planned high yield bond fund will target the shorter end of the market and will have a duration of less than 1 year. This is a key difference from existing ETFs covering high yield bonds, most of which have effective durations ranging between 4-5 years. As such, investors wanting to access the shorter end of the high yield bond market can look to Guggenheim’s planned fund. With regards to the active management of the fund, the management process is intended to be highly flexible and responsive to market opportunities. The fund’s advisor, Guggenheim Funds Investment Advisors, will utilize a top-down approach to evaluate investment themes and relative value while using bottom-up credit research to select individual securities. The fund is allowed to invest up to 20% of the fund in bank loans as well, while limiting exposure to securities of any one issuer to 2-3%.

Day-to-day portfolio management of the fund will be done by Patrick L. Mitchell, who joined Guggenheim as a Managing Director in 2009. The proposed fee structure for the fund has not yet been disclosed.

ETF

Gold & the Overall Strength of the Market

December 13th, 2010

The past week has been interesting to say the least. Gold is trying to find support while the SP500 grinds its way higher. Let’s jump into the charts and analysis to get better feel for what I feel is happening here.

Gold 4 Hour Chart
As you can see from the chart below gold has formed a possible double top. The fact that it made a higher high is actually a bearish sign for the intermediate term 1-3 weeks. When we see a higher high getting sold into with big volume it typically means the big money is unloading large positions into the surge of breakout traders and short covering that occurs when a new high is reached. Following the big money is very important to keep an eye on as it can warn us of possible trend changes before it occurs.

The current selling volume is not exactly a healthy sign if you are looking for higher prices in the near term. If this pattern breaks down I would expect $1340 to be reached very quickly.

Keep in mind gold it in a strong up trend still. Shorting is not the best play in my opinion. I prefer to see pullback which washes the market of weak positions then jump on the long side for another bounce/rally.

SP500 Market Internal Strength – 10min, 3 days chart
I watch these charts to get a feel for the overall market strength on a short term basis. The top chart shows the SPY etf breaking above a resistance trend line on Friday afternoon. This occurred on light volume meaning it is mostly likely a false breakout and Monday we could see a gap lower at the open or a pop & drop. The two other indicators are reaching an extreme level which normally tells us a pullback is due in the next 24-48 hours of trading. The question is, will us just be a bull market pause or will we get a decent pullback.

The red indicator in the top chart and the red indicator levels on the charts below that help us time the market as to when profits should be taken or to tighten our stops if we have any long positions.

The broad market is still in a very strong uptrend so moving stops up and buying on oversold dips is the way to play it.

Weekend Market Analysis Conclusion:
In short, both gold and the stock market are in a bull market (uptrend). Trying to pick a top to short the market is not a good idea. Instead I am looking for an extreme oversold condition to help reduce downside risk before taking a long position.

The overall strength of the market (SP500 and Gold) I think are starting to weaken but in no way am I going to short them. We continue to buy dips until proven wrong because indicators can stay in the extreme overbought levels for a long period of time. Generally the biggest moves happen in the last 10-20% of the trend.

If you would like to get these weekly reports and my trading tips book free be sure to visit my website: www.thegoldandoilguy.com/trade-money-emotions.php

Chris Vermeulen

Read more here:
Gold & the Overall Strength of the Market




Chris Vermeulen is a full time daytrader and swing trader specializing in trading (NYSE:GLD), (NYSE:GDX), XGD.TO, (NYSE:SLV) and (NYSE:USO). I provide my trading charts, market insight and trading signals to members of my newsletter service. If you have any questions feel free to send me an email: Chris@TheGoldAndOilGuy.com This article is intended solely for information purposes. The opinions are those of the author only. Please conduct further research and consult your financial advisor before making any investment/trading decision. No responsibility can be accepted for losses that may result as a consequence of trading on the basis of this analysis.

Commodities, ETF

Hottest ETFs of the Week – Tax Deal Edition

December 12th, 2010

Market action this week was very much driven by the “framework” announced by Obama which was met with surprising resistance from within his own party – especially surrounding the estate tax provisions and a payroll tax holiday that is viewed as only benefiting higher earners.  With a price tag estimated to be in the $850 Billion range, bonds tanked in rapid fashion immediately following the announcement.  While some would peg the bond selloff as a movement out of safety into equities and others would peg it as market “confidence” toward a better economic recovery scenario, pessimists would highlight that this is demonstrating the market reacting to a further impaired creditworthiness situation lending further doubt to the notion that the US will be able to fulfill its debt obligations further out into the future with no such “framework” to drive down the national debt following the sad outcome of the deficit commission weeks earlier.

Bonds did not recover meaningfully in the days to follow, so it will be telling to see if this was in fact the best time to short the US Treasury or whether this is the new range until we actually see improved economic activity in 2011 or a retrenchment into a double-dip in housing and possibly GDP growth as well.

With these bond market perturbations, we saw certain sectors rally which may well continue in the coming weeks.  Here were this week’s top conventional and leveraged ETFs:

Conventional ETFs:

KBE - SPDR KBW Bank – Up 6% – With Citigroup (C) making up 10% of this ETFs holdings, and many other financials rallying on the week, KBE was a top performing conventional ETF.  Banks, insurance companies, Business Development Companies, REIT companies and many other firms tied to loose money, tax breaks and a stronger 2011 all saw shares rally strongly on Obama’s announcement.  KBE is up 20% YTD.

XLF – Financial Select Sector SPDR – Up 4% -XLF varies slightly from KBE in that its top holdings are more heavily weighted toward JP Morgan (JPM) and Berkshire Hathaway (BRK.B) but the performance of the two tends to track pretty closely together over long periods of time.  However, on the year, KBE is outperforming at 20% up vs. 9% for XLF.

VNM - Market Vectors Vietnam – Up 4% - To get in a non-US, non-Financial ETF, I wanted to highlight Vietnam as a top performing single country ETF.  Many of these smaller Frontier Markets are starting to overtake the conventional BRIC countries since so much hot money flowed into those markets previously and especially following the runup to QE2.

Leveraged ETFs:

FAS - Direxion Daily Financial Bull 3X – Up 10% - This ETF provides 3 times the daily return of the underlying Financials sector.  Since financials were strong on the week on Obama’s announcement, FAS took top billing in the leveraged ETF category.  As always, I caution that leveraged ETFs make for a decent trade over a few days’ period but should be avoided at all costs as a long-term investment.  There is an oft-misunderstood phenomena tied to the daily resets that virtually guarantees that over time, all leveraged ETFs go to zero, hence, constant reverse splits.  This is due to the compounded effect of the daily price resets.  Buyer beware.  to demonstrate this further, the KBE cited above is up 20% on the year while a 3X Financials FAS is up only 8% due to this value decay.

TNA – Direxion Daily Small Cap Bull 3X - Up 8.5% – The next sector that performed strongly in the leveraged genre was the small cap stock segment.  With equities up in general, small caps have tended to outperform during this recovery, especially as prospects for credit and growth continue to show promise.

TMV – Direxion Daily 30-Yr Treasury Bear 3X – Up 5% – Bonds sold off strongly on what amounted to another massive stimulus program.  With close to another Trillion dollars being spent over the next few years and no mention of any form of future austerity or deficit reduction plans, it was completely reasonable to expect to see bonds sell off.  The question is whether this is now largely baked into market expectations or whether bonds can somehow regain traction with the QE2 program still in place well into 2011.

Disclosure: Author has no holdings in any of the aforementioned ETFs or equities.

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