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Founder of See It Market. Active Investor and Technician. My thoughts on the financial markets and other misc. happenings.

[andrewnyquist]

Weighing Investor “Fear” Amidst The Market Chop 

First we had a collapse in Crude Oil prices. Then we experienced October’s swift stock drop in stocks. These events marked the beginning of an influx of volatility and “chop” into the financial markets. And it’s lasted over 6 months and spanned all asset classes... and it may not be ready to leave us just yet.

Turning out focus to the equity markets, it’s clear that the months long period of price swings is related to investors ongoing battle with price discovery. Basically, lots of investors are “certain” about where the market is going, but their “certainty” is far from unified... and this leads to uncertainty. 

This type of environment is hard on active investors of all types, as it messes with psychology and makes everyone a short-term trader, as well as a macro economist all at the same time. But I digress.

Once again we are seeing a bit of a rollover in equities. The early morning low on the S&P 500 is 2045.50. This puts the broad market index 3.5% off the 2015 highs. This could be “just another turn lower” (i.e. 3-5 percent), or it could turn into something worse. On Tuesday, I highlighted a few reasons for the recent rollover in stocks and some levels to watch.

Should the market weaken further from here, there are two good indicators to watch. One is the Volatility Index (VIX) and the second is the Equity Put-Call Ratio. If both are rising, investors tend to be selling stocks and buying more puts than calls. When these hit extremes, they tend to mark near-term bottoms.

Below is the VIX vs the S&P 500. You can see that the recent VIX lows (a sign of complacency) aligned with this (and recent) rollovers within the chop.

So what would be a sign that “fear” has gripped the markets? Well perhaps recent history can be a guideline. Below is a chart showing where the Volatility Index (VIX) and Equity Put-Call ratio have topped (marking market bottoms) over the past 4 years. Note that the Equity Put-Call ratio in the chart below is through yesterday.

The main thing here is to realize that the markets are choppy and that this can be hazardous to our decision making. Stay patient, create and follow a plan, and resist the urge to “go big” or over trade.

Thanks for reading.

Twitter:  @andrewnyquist​

[andrewnyquist]

Is It Spring 2012 Again? Watch That Dow Theory Non-Confirmation

Last October’s correction and subsequent “V” bottom saw the major stock market indices like the S&P 500, Nasdaq, and Dow Jones Industrial Average catapult back to new highs in November. And for those investors that follow Dow Theory, the Industrials new highs were confirmed by new highs on the Dow Jones Transportation Average (DJT) - the “Transports” - as well.

That’s the good news. The bad news is that it was short-lived. The Transports did not see follow through higher and began to lag. And this non-confirmation signal may be one reason for the lackluster action thus far in 2015.

One of the core tenets of Dow Theory is confirmation. In short, this means that the direction of the market is confirmed when both “Industrials” and “Transports” make new highs or new lows together. When this doesn’t occur, it is a non-confirmation divergence which can put the trend in jeopardy.

I covered the current Dow Theory divergence in depth a couple weeks ago - you can read more here.

Before I go any further, it’s important to also remember that time frames matter - So note that the current non-confirmation is (and has been) a short-term indicator.

As you can see in the chart below, the market had pullbacks in December and January. But the Dow Jones Industrial Average (DJIA) was resilient in making new highs again in February, en route to its current all-time closing high on March 2nd. But as this Industrials made new highs, the Dow Jones Transportation Average did not. In fact, the “Transports” haven’t made a new price high since late November 2014.

2015 Non-Confirmation Chart

A similar development occurred in 2012, leading to a deeper market pullback. Although there is no guarantee that the current market is going to follow this pattern to a deeper correction, it may explain the recent lackluster performance.

Spring 2012 Non-Confirmation Chart

The market has already experienced a pullback of roughly 4 percent from the highs. I will be keeping an eye on this indicator (as well as the Transports relative performance) as another gauge of overall market breadth and health as we head into Springtime. Thanks for reading and have a great weekend.

You can follow me on twitter: @andrewnyquist​

[andrewnyquist]

Breaking Down The Nasdaq Pullback: Levels & Thoughts

After hitting the big Nasdaq 5000 level, the market decided it was time for a breather. Whether that breather turns into a correction will depend on how the Nasdaq handles a couple of key support levels within the garden variety 2 to 5 percent pullback range.

With this in mind, it should be noted that pullbacks from big round numbers like Nasdaq 5000 are nothing new. And this is a different market landscape than the bubble in 2000. (I covered those differences last week).

As well, after last Monday's closing high, I noted some Nasdaq statistics on my Twitter feed. Here's one: The Nasdaq hitting the 5000 mark is a well-earned celebration. But it's up almost 900 points off the October low (4116.60). That's 21.7% in 4+ months.

When coupled with subpar breadth and overly bullish short-term sentiment (see Apple's (AAPL) rip higher in Jan/Feb, the Nasdaq was due for a pullback. And that's exactly what its been thus far. In investing, there are no rules or guarantees where to (or how far) a pullback will go. So to help with that, I like to highlight support levels to help myself better understand the amount of exposure I should have.

Below is a daily chart of the Nasdaq Composite. As you can see, the Nasdaq is retesting its February breakout. There are two support levels nearby that should tell us if this is a garden variety pullback or something deeper. The first is 4800, which marks the November/December highs and a lateral breakout confirmation level. The 50 day moving average also resides in that area. The next level is around 4750, which is where the breakout above the downtrend occurred. 

A deeper move would signal more caution for investors, as there are open gaps that may beckon at 4716 and 4547 (the December lows), along with the 200 day moving average.

Nasdaq Composite Daily Chart

Thanks for reading. Have a great week.

Follow me on Twitter:  @andrewnyquist​  |  Read more on See It Market.

[andrewnyquist]

3 Reasons For Gold's (GLD) Decline Today

After rallying back above $1300 in January, Gold investors had an extra bounce in their step. By all accounts, it seemed as if Gold (GLD) was getting ready for primetime again. Then came today's jobs report and whoosh lower. At best, this delays Gold resurgence.

So what happened? Over on See It Market, I wrote about why Gold was at a technical crossroads yesterday. Below is a chart of the descending triangle that formed on GLD over the past 2 weeks. But that was the setup.

You can see the break lower today into the gap-fill area. But the bigger question is why did it so easily breakdown. Sure a stronger employment report (and dollar) doesn't help, but Gold rose in the face of a stronger dollar in January, so I don't buy it. But we'll call it a reason for now.

I think there were 2 more important reasons... and both highlight Gold's impending weakness after its run higher: 1) Gold fell over the past 10 days on a slightly weaker dollar. In theory, this should have been a tailwind, helping GLD breakout to new highs. Didn't happen. 2) The Relative Strength Index (RSI) on the daily chart (below) slipped to 50, a critical level to hold when in rally mode. This indicated vulnerability. (and note it fell under 50 with today's morning weakness).

So now what? If Gold is going to regroup over the coming days/weeks, it will have two opportunities to do so. The first level will be a retest of the breakout around $117-$118 and the final opportunity around $114 (the December 2013 and October 2014 lows. And Gold's price action has implications for the miners (GDX): Note they are trading lower today as well. 

Next up: Let's see how Gold reacts to the support levels above. They are Gold's last hopes to keeping this rally alive.

Thanks for reading.

You can also follow me on Twitter: @andrewnyquist​

Gold image source: Wikimedia Commons.

[andrewnyquist]

Apple Bulls Awaiting This Key Trend Ingredient

After blowing out its earnings report and breaking out above its near-term downtrend line, Apple (AAPL) quickly moved higher to test its all-time highs. Seems Apple is ready for another major breakout. Or is it?

Yesterday on See It Market, I wrote about 3 Things Apple Bulls Need To See Now. I highlighted some key ingredients that would make for another leg higher and I wanted to share one of them with you today: Follow Through.

It's a term that is often used by trend followers and market technicians. But what does it mean? Quite simply, follow through is what investors (and traders) like to see after a stock or index breaks out of a consolidation phase. And that follow through is price confirmation in the direction of the break (often times with increased volume. So in Apple's case, an investor would like to see follow through buying that pushes the stock above all-time highs.

In the weekly chart below, you can see that Apple has broken out of consolidation phases 4 times in the past 19 months. And in the 3 previous breakouts, it saw follow through price action higher.

Apple (AAPL) Weekly Chart

If Apple is going to continue to pace (and outperform) the large cap tech ETF, PowerShares QQQ Trust (QQQ), the stock will need to see an uptick in buying activity over the coming weeks. Follow through is key here. 

For a few more things to watch, check out my post over at See It Market. Thanks for reading.

You can also follow me on Twitter: @andrewnyquist​

[andrewnyquist]

It's A Big Week For The Consumer: Here's Why

It's already been an interesting day, with the stock market gapping lower on (presumably) poor earnings out of Microsoft (MSFT) and Caterpillar (CAT). On the flip side, this morning also included positive home sales data and a spike in the Conference Board Consumer Confidence. Tis the season for whipsaws and ranges... and traders.

Earlier this morning, I wrote about the importance of the consumer over on See It Market. The crux of the case revolves around the shift in storyline after poor December retail sales data came out earlier this month. And this, combined with earnings and currency market concerns (see the higher dollar & Microsoft's currency headwinds), has investors uncertain. What would change the dynamic?  Perhaps some stellar earnings data out of Apple (AAPL) tonight - it's visual eye candy for retail - and/or Amazon (AMZN) on Thursday. Or perhaps a strong pending home sales number on Thursday or a better than expected 4Q GDP report on Friday?

It's all part of a messy picture right now. And all this additional noise often has a debilitating effect. For those that are price purists, you may simply want to look at a chart. Below is a chart for the Consumer Discretionary ETF (XLY). It clearly shows that consumer sector has been in flux over the past 2 months. The ranges is $68-$73 and until price breaks that range, investors may be hunting for more data points on the consumer.

Consumer Discretionary (XLY) Daily Chart

As well, the SPDR S&P 500 (SPY) has formed a similar pattern to XLY. So it's quite possible that US equities will follow the consumer's lead in early 2015... questions is: will that be higher or lower. Watch the XLY for clues.

Thanks for reading.

Twitter: @andrewnyquist​

[andrewnyquist]

Gold Conundrum: To Rally Or Not To Rally?

There have been a number of signs that Gold wants to rally. That is both encouraging and concerning. Encouraging because its been some time since we've seen a rally of any import in the yellow metal. Yet, concerning because it hasn't rallied much above $1200 since losing that level again in late October.

Yet today (as of this writing) February Gold futures are trading around $1210. This is a rally of around $30 to kick off the new year, and as Aaron Jackson wrote today on See It Market, this may signal a pivot shift in supply and demand around Gold. Jackson also pointed out a potential head and shoulders pattern on the daily chart. But for this pattern to work, Gold will need to break above $1230.

Daily chart from Aaron Jackson's post:

It's worth noting that Gold has held up pretty well throughout the sell off in Crude Oil and US Dollar rally. Dan Neagoy recently wrote that Gold in terms of rubles actually rallied pretty strongly during the Russian crisis. And similarly, Gold in terms of Euro and Yen has rallied as well. Perhaps the bounce in Gold has already begun, just in earnest in other currencies.

If there is more energy in Gold's engine, it will likely show up through a price move over $1230.

Keep an eye on the Euro/US Dollar (EURUSD)... and be mindful of the upcoming Greek Elections (on Jan 25), as well as any word out of Europe regarding stimulus (or lack thereof).

Thanks for reading. You can also follow me on Twitter: @andrewnyquist.

[andrewnyquist]

Gold To Silver Ratio Pointing To Shift In 2015: Implications

Precious metals investors often check in on the Gold to Silver price per ounce ratio to gauge which metal is a better investment. As we enter 2015, it appears that the ratio may be nearing a top. Here are a few implications:

1.  At some point Silver may begin to outperform Gold. This doesn't mean that Silver will necessarily rise, it just means that it may begin to perform better than Gold.

2.  As deflation concerns continue to swirl, precious metals are still an 'out of favor' asset class. A bottom for both Gold and Silver will likely depend on numerous variables, but a return to broad global growth, a softer dollar, OR a rise in geopolitical tensions could be catalysts.

3.  If/When Silver begins to outperform, it will likely be a positive indicator for precious metals as a whole. It's kind of like the high-beta brother to Gold, so an uptick in Silver performance should be well-received by metals investors. But until then...

Note that I recently wrote about Gold and Silver fundamentals heading into 2015. Check it out for more analysis on precious metals.

Gold:Silver Ratio Chart since 1980

  Thanks for reading.

[andrewnyquist]

3 Reasons Geopolitics Are Heating Up & Why This May Benefit US Equities

This past week has seen some saber rattling on the geopolitical front (see Russia), but this feels much ado about nothing for the financial markets, as central bank easing news has kept stocks elevated and investors happy... Japan, then China, perhaps Europe now?

But that only scratches the surface. And note the U.S. isn't currently included in that list of "easers."

Ask yourself why easing occurs in the first place. Here's a couple reasons:  1) An attempt to spur economic growth  2) An attempt to devalue a currency to spur #1.

So if other parts of the world are struggling to find economic growth, perhaps their investors at home have been busy investing in other parts of the world (i.e. the U.S.).

But let's dig a little deeper, looking at where and why geopolitics may heat up. Because this is a near-term concern for global equities, even if it adds to the theme above.

First and foremost, Crude Oil is of major import here. At $75/barrel, Oil prices are down nearly $30 since summer. This puts pressure on economic regions that are dependent upon energy exports as a driver of there economy. Two come to mind: 1) Russia  2) The Middle East.  Coupled with sanctions, how long can this go on before something gives with Russia (and its relations with the U.S.). I'm concerned this could add pressure to the current Russia-Ukraine conflict. See a chart of Oil below:

WTI Light Crude Oil Prices (EOD)

            Charts created on stockcharts.com

This economic theme applies to the Middle East as well. If there is a global slowdown occurring, how will lower Oil prices further impact the region's individual economies? Could social unrest add fuel to an already tenuous situation.

Europe is another region that will need to spur economic growth or risk a rise in social unrest. The Euro zone economy has really sputtered and the heat is on. Are they next to announce some form of dramatic easing/stimulus? Unemployment, and especially youth unemployment, remain stubbornly high. According to Statista, the under 25 unemployment rate in Spain was 54% as of May 2014; Italy was 43% and France 22.5%. The average for the Euro Area was 23.3%. That's their future and those numbers will need to go down if Europe is to find stability.

Again, here we can see visually how money may be flowing from Europe and Russia to U.S. equities:

S&P 500 vs German DAX vs Russian ETF (RSX)

A stronger US Dollar is a mixed bag as well. While it assists in weakening currencies of economies that are struggling (positive), it's the deepest currency in the world, and its strength affects capital, from debt to equities to commodities to currencies (the results of which are uncertain).

My final concern isn't necessarily a concern of today, but it may be a concern in the world of tomorrow... if easing measures of global central banks do not begin to broadly float the global economy, it will likely lead to regional tensions, as economics is typically one of the root causes for conflict.

But, as I mentioned above, this could also be a major reason for capital to continue flowing to U.S. assets for the time being. Trade safe and thanks for reading.

[andrewnyquist]

3 Things I'm Watching On Fed Day

As the Federal Reserve concludes its two day meeting today and prepares its highly anticipated statement, the markets are at an interesting juncture. To add some framework to what's happened and what is currently happening, I want to share 3 things that I find interesting here and now.

1. Investor Psychology:  October has been a wild month. Just two weeks ago, investors reached near panic-mode, as the put/call ratio and VIX peaked.  That panic set the stage for a dramatic rally - 9 percent in two weeks.  That doesn't even feel healthy to write.  Will there be reverberations from the earthquake-like "V" bottom?  Is it even fathomable that this uber-rally could be bearish?

2. The U.S. Dollar - After a huge summer rally, the U.S. Dollar is pausing. The pause comes after the daily and weekly charts nearly touched 90 on the RSI (relative strength index). Will the Fed add to the recent Dollar selloff, or will they rekindle the rally?  What the U.S. Dollar does from here will have implications across the financial markets. And trust me, commodities traders are watching...

3. Technical Levels on the Major Averages:  The S&P 500 has broken all fib retracement levels and is in all-out "retest" mode, touching up as high as 1991.40 in morning trade.  But probably the most important index to watch here is the Russell 2000 (RUT). The small caps index is touching up near its falling 200 day moving average, broken uptrend line, and current downtrend line. A sustained break higher would be huge for this high-beta, risk-on index. Likewise, a failure here would be reason for caution.

Trade safe.

[andrewnyquist]

Market Update: 3 Things I'm Watching Right Now

Okay, I'll say it. That was a brutal day. The S&P 500 (SPX) dropped 1.62% on Thursday and managed to close on the lows of the day. All told, from last Friday's highs to today's close, the S&P 500 has given back 2.6%.

Don't get me wrong, the larger technical picture and uptrend are still in tact. However, a day like today will raise the antennae of active investors.

So, what's going on? Well, I think that there are a few things bothering U.S. equities here:

1.  A Stronger US Dollar - The dollar is in the midst of a multi-month rally and recently surged higher. A stronger dollar tends to be a headwind for equities. As well, the dollar accelerated higher into Thursday's session, possibly prompting Thursday's sharp break lower in equities.

2.  Weakness in the Small Caps and Emerging Markets - The Russell 2000 (RUT) and Emerging Markets ETF (EEM) have been significant under-performers (compared to the S&P 500) and will likely need to stem the bleeding before the market can move higher again. Today the RUT touched its August lows and, should that level break, it will set up a showdown with the February and May lows around 1080. That is a very important technical level to monitor.

3.  S&P 500 Technical Support Levels - Thursday's action was also important on the technical front. The S&P 500 took out its 50 day moving average, along with last week's lows. This action prompted me to post an S&P 500 technical update on See It Market earlier today. In that post, I highlighted some key support levels for traders to watch over the near-term. I want to share 3 of those levels here with you, as I think they are important to preserving the intermediate term trend:

1948 - This level represents the 61.8 Fibonacci retracement of the August 7 to September 19 rally.

1940 - This area (+/- a few pts) is the trend line of the April and August lows. A close below 1940 with follow through would hint at a deeper pullback for equities.

1895-1905 - This area represents the April highs, May breakout, and August retest. Bulls definitely want to see this level hold.

S&P 500 Daily Chart:

Thanks for reading.

Picture courtesy of ernestkoe (flickr)

[andrewnyquist]

Chart of the Day: Euro Capitulation or Trend Affirmation?

The Euro plunged today on the ECB announcement of a triple rate cut and additional stimulus programs. Traders had largely expected some form of stimulus, but the extent of the actions and the tone caught some by surprise. You can see this by simply looking the Euro's reaction to the announcement.

One thing that I found interesting was the fact that the Euro plunged after weeks of trending lower. Many traders know that oversold conditions can stay oversold for longer than one thinks (and this is a good example of that), but it appeared by all accounts that the Euro was pricing in some strong action.

See the chart of the CurrencyShares Euro ETF (FXE) below:

So what do we make of the steep drop lower today? Well let's back up a bit and look at the chart. The double top pattern formation and subsequent confirmation break lower measured to around 132. This area held for almost two weeks (working off some of the oversold condition) before turning lower. The extension lower hinted at near-term capitulation as the RSI (Relative Strength Index) dipped under 30 again.

With this in mind, I think the gap "break" lower this morning may be a sign that capitulation for this move is occurring. There is no need to be a hero here, as capitulation moves can last longer and go further than one thinks. But they also tend to be a sign of near-term exhaustion. The coming days will be important to see if the Euro finds a near-term bottom.

[andrewnyquist]

S&P 500 Nearing Critical Level: Coming Days Important

The S&P 500 (SPX) has returned to the scene of the crime. Back on July 24th, the SPX posted all-time highs on an intraday (1991.39) and closing basis (1987.98), only to gap lower at the open the following morning. But as many savvy traders are aware, gaps tend to act as magnets (especially as we near them). Yet, at the same time, they can serve as resistance as the market uses energy getting to, and filling them.

So to recap: After a 4 percent multi-day pullback, the market has come roaring back yet again. And price is now approaching that July 24/25 open gap magnet… and at the same time backtesting its broken trend line. No need to be precise here, just worth understanding that 1985/1988 is a resistance zone where the market could see some turbulence. 

It is also worth noting that the Volatility Index (VIX) has been pummeled recently and is overdue for a bounce. And this makes the coming days of interest. See SPX and VIX charts below.

S&P 500 (SPX) daily chart

Volatility Index (VIX) daily chart

For the SPX, some consolidation followed by a sustained move above 1988 could set up a move to 2030 or more.  This would provide confirmation for the recent breakout on the Nasdaq 100. 

Back in late May and early June, I wrote a couple of technical posts outlining a potential roadmap for the S&P 500… the high target was 2032.

However, a failed retest of the old highs could set up another leg lower.

Either way, risk is still high. August and September tend to be poor performing months seasonally, and active investors may not be playing for much upside from here.  So stay focused and disciplined. Thanks for reading.

[andrewnyquist]

Why Being Yourself Is The Key To Being A Successful Investor

You don’t need to be that guy to be successful.  Who knows, but that media savvy guy or that uber-confident trader may just have a different investing time frame than you.  Or they may have a different psychological make up.  Or different collection of experiences. OR THEY MAY JUST NOT BE YOU.

And that’s okay.

Therein lies the secret.  The secret to each of our celebrated successes and failures as active investors.  Be yourself by getting to know yourself.  Understand what makes you tick and why.  How your losses and gains were derived.

And be comfortable in your own investing skin.

Sure, there are plenty of successful traders and investors out there. And many of which you should be following, sharing ideas with, and learning from. But there is a fine line between reading advice and needing advice. As investors, we need to learn to stand our own 2 feet.

Few understand this as well as myself. I have been actively investing in the markets for the past 15 years. And it took me some time to realize that there wasn’t a cookie cutter recipe for success. Sure, reading and researching helps, but it doesn’t always equate to success.  Investing is psychological. And because we constantly want to protect our inner-being, we need to understand how to tame our impulses.

I really enjoy writing this type of article when the markets (i.e. S&P 500) are experiencing some volatility and price swings. Moreover, it is during these times that investors learn more about themselves and build critical ‘experience’ inventory to draw upon. 

In my opinion, active investing is one of the most difficult things anyone can endeavor to do. And unless we learn more about our risk profile, we’ll never be at our best.

In short, when we try to be someone we’re not, well, we’re not ourselves.  And that either leaves us vulnerable to losses, drawing straws, or celebrating gains that have little to do with who we are or how we got from point a to b.

So what can investors do to take their game to the next level?

Keep an investing diary – This can include entries/exits, and notes.  If nothing else, it will keep you accountable.

Make a plan and follow it – Even if this leads to some losses early on, you’ll be able to figure out if you are better at investing on longer time frames or trading shorter ones. Set realistic goals and be okay taking profits (or losses) to refresh your capital for the next opportunity.

Minimize losses – Big losses greatly damage your psychology and subconsciously separate you from yourself (it’s that ego thing). Realize that losses are going to happen… in fact, a sign of a mature investor is knowing when to take a loss… and being okay with it.

Take care, and thanks for reading. 

[andrewnyquist]

Evidence For A Tradable Bottom Mounts, But Markets Tenuous

Last Thursday and Friday the equity markets swooned lower. This was followed up by a higher open on Monday that gave way to a retest of Friday's lows (and the conviction of traders).  The lows held.

So far, so good. For traders that is.  On a short-term basis, momentum lows offer opportunity on a risk-reward basis. But when they come with underlying deterioration (see Russell 2000 performance), those with a longer-term eye tend to lighten up on the market bounces. So caution is still in effect.

The chart above highlights the stealth drop lower last week. All told, from June 24 to Aug 1 (intraday), the S&P 500 fell 3.8%.  And at Friday's close, just 33% of S&P 100 stocks were trading above the 50 day moving average. The markets simply became short-term oversold as fear was quick to settle in. Again, good short-term; uncertain intermediate term. 

Ryan Detrick did an excellent study over the weekend looking at S&P 500 performance when the Put/Call equity ratio spikes. On Friday this ratio ticked over 1, indicating fear in the markets and the potential for a short-term bottom. But it also showed mixed results further out. Another solid research piece was done by Chris Burba on Thursday, looking at quick drops in market breadth and the correlation to S&P 500 performance. Again, the results showed strength short-term (days).

All told, I'll be watching to see if Friday's lows hold. Note that the next big support levels below Friday's lows are 1900, then 1850. Trade safe and stay disciplined.

[andrewnyquist]

Is A GOLD Rally Setting up? Watch 1275

Over the past 2 years, Gold investors have been quieted by the relentless rally in equities. But considering the frothy sentiment of Gold bulls at the 2011 peak, it has taken some time to wring out the excess.

And this has shown up several times over the past year, as rally attempts have failed... perhaps because bulls were sucked back in to quickly. But after the grinding back and forth, the bulls have quieted down and Gold may be setting up for a move higher.

In the daily Gold chart $1275 seems to be operating as a median and dictating where Gold prices lead on a short-term basis. See the Nov 2013 breakdown, Feb 2014 breakout, April-May consolidation, and recent June break higher.

And considering that Gold is currently above that price and backtesting it again!, Gold may be setting up for a nice rally… IF 1275 holds. If not, look for price to continue to move sideways within a range.

[andrewnyquist]

10 Signs The Capital Markets Are Confused

Yesterday I covered 10 reasons that investors remain confused about the near-term direction of equities. The fact that investors are confused shouldn't surprise anyone, even the most successful active investors.

The financial crisis caused skepticism to run deep within the retail investor. And the ensuing recovery has been questioned for the past 5 years (by pros and amateurs alike). But during that same period of time, equities have pushed higher and higher. And performance anxiety has become raw and real.

Fast forward to today, and it's apparent that a good deal of investors are having trouble reading the tea leaves. Several technical and fundamental indicators have flashed caution to no avail in 2014. But this can only go on for so long before something gives… no doubt, the tension on the tape is building. 

So what's so amiss in 2014?  Well, here is a short list adapted from my post yesterday on See It Market that highlights 10 signs the capital markets are confused.

1.  The Small Caps have underperformed all year (see Russell 2000 - RUT).

2.  Emerging Markets (EEM) have outperformed over recent months.

3.  10 year government bond yields across much of Europe are around or lower than the U.S. 10 Year Treasury Yield (TNX).

High yield bonds have been gobbled up like candy.

4.  The Euro has been in a mini free-fall.

5.  The Regional Banks Index (KRE) has traded in a wide range.

6.  U.S 1st quarter GDP was negative and the U.S. economy continues to give uncertain investors reasons for concern.

7.  Crude Oil is over $100/barrel.

8.  The Utilities Select Sector ETF (XLU) is up 12.2% (as of yesterday's close) not including dividends.

9.  The VIX (Volatility Index) put on a 10-handle and is currently clocking in at 12.

10.  Geopolitical drama is becoming a bigger concern.  From the Syrian civil war to the NSA debacle to the Russia-Ukraine tensions to the Israeli-Palestinian conflict, major super powers are beginning to stir.

Today, the S&P 500 is less than one percent from the big round 2000 mile marker. Performance anxiety is palpable and may drive equities higher short-term. But considering the current intermarket variables at play, 'risk' is also creeping higher. All the more reason for investors to stay focused and disciplined in the days/weeks ahead.