The Canadian Technician

$NATGAS Continues To Stall

$NATGAS still looks to be building a basing pattern, but the start of a new uptrend has been a long time coming. I mentioned this right at the end of yesterday's webinar, but I don't think the recording caught all of it. I was expecting Natural Gas to start turning up well over a month ago. The trade continues to be waffling around here. The losses are still manageable, but its frustrating when the planned trade stalls. Here is the chart. 

While the consolidation continues, the price action broke below the up sloping support line. The MACD has rolled over at the zero line which is a bearish development. Perhaps we'll need to see $NATGAS test the $2.56 low again. The trade has not worked here in a reasonable amount of time, so it might be better to sit back and wait, rather than leave it at risk here. Thursday's low might just be testing where the stops are, but the MACD crossover so close to zero can't be a positive in terms of momentum. Time to watch very closely and have a plan in place.

Good trading,
Greg Schnell, CMT

Industrial Metals ($GYX) Start To Move

The Goldman Sachs Commodity Indexes (GSCI is the acronym) have been setting up bases lately and I have covered the commodities extensively on the Thursday March 19th webinar. The GSCI Index for Industrial Metals ($GYX) had a ballistic launch party.

I think it is important to set the back drop.

Japan is stimulating by $60 B / month

Eurozone is stimulating by $60 B/ month

China's premier announced a Whatever It Takes moment last weekend. 

25 Central Banks have announced monetary easing since January 1. 

The US Federal Reserve has removed the word patient from the Fed statement, but continues to wait before tightening monetary conditions.

This might just be the world's largest tailwind ever. Let's not forget that the last time 4 central banks eased monetary policy within a month of each other we had the surge off the October 2012 lows that was a massive upside move. This week, the advance decline line made new highs on the $NYA ahead of price which is getting very bullish. As a backdrop, I want to remain bullish.

Because the commodity chemicals companies within the materials sector in the US includes chemical companies like Dupont, Praxair, Airgas and Dow Chemical, the US version of the materials sector is vastly different than the Canadian version. That is not a bad thing, but it is important to understand the difference. That took me a while to learn. Let me illustrate my point.

Chart 1

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The Rest Of The World Flashes A Caution Sign

Since the announcement of European QE, things across the rest of the world have started to perk up. Even in a strong uptrend, the market pulls back. The caution flag that showed up on VEU last week is troublesome because of the timing and chart position. Recently we had all markets a-blazing and new highs were everywhere around the world. I was very optimistic with the large number of participating markets world wide. Then the new highs didn't hold and everything rolled back over.  We also saw this same dynamic back in 2012 when we had the US administration and the Congress fighting over the fiscal cliff with a backdrop of worldwide stimulus. The US markets started to weaken as we headed to January 1, 2011 (not shown). Then, with the politicians generating maximum drama in front of the news media, they came to a last minute agreement. The rally continued! Here we sit with the timing very similar. The world breaks out to all time highs on the back of QE in Europe and then stalls. Not only does it stall, but it rolls over on charts like the $BSE and the $FTSE. Europe continued accelerating.

 Let me walk through the chart. First of all, we'll start at the RSI, from Constance Brown's work. She built some excellent models on RSI analysis. The RSI establishes two major ranges. From 40-90 in a bull market and from 10 - 65 in a bear market. When we get bear market indicators or signals, we have to acknowledge them and see if the market does in fact crack enough to be very weak. In reality, during bull markets, the large institutional houses are adding to positions on pullbacks which holds the market up. When they stop supporting the markets on pullbacks, the market falls harder than usual and this shows up on the RSI. The September/October 2014 spike down was before the Japanese and European central banks started their stimulus programs.

Chart 1

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3 Engaging Natural Gas Charts Make This Setup Interesting

Just checking in on the commodities and today is a little more interesting than most. Natural Gas continues to consolidate sideways but after repeated spikes down, the price seems to be stabilizing.

Chart 1 

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Alibaba (BABA) Approaches Lockup Expiration Day - Doomsday or BuyBuyDay?

So as Alibaba (BABA) approaches its lockup expiration day on March 18th, the news media is announcing the plunge in the stock price that will happen as the stock goes through this period. Here is the chart. Not much to smile about. A 4 month down trend, recently trading below the original pullback and under performing the $SPX on the purple SPURS. A small glimpse of enthusiasm could be tilted towards the positive divergence on the MACD, but that would be a stretch. On March 18, when the lockup expires, what will happen to this highly praised IPO?

Chart 1

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Winding My Apple (AAPL) Watch - Part 2

This is part 2 of a 2 part series on Apple through the stock charts. The first article can be found here. Winding My Apple Watch - Part 1.

First of all, let's connect to the previous article with the final chart in Part 1 starting Part 2. Apple's stock tripled from August 2004 to February 2005. The new look desktop was all the rage, the U2 iPod was available and the company continued to roll out new improvements in iLife software. The Mac computers were really starting to garner attention in the PC world as Windows continued to struggle with security. The iTunes store showed up in Canada and other countries around the world. The Apple retail store was accelerating and Apple was building on the ecosystem between the computer and the iPod. The glitz of the product announcements continued to impress the media.

Chart 1

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Winding My Apple (AAPL) Watch - Part 1

With the big event coming up on March 9th, Apple (AAPL) will move into a totally new area, wearables. With $150 Billion in horsepower, Apple will release the world's biggest initial product launch ever. Since announcing the first Apple device to mount on your skin, the online world has been a social media marketing dream for Apple.

Chart 1

Authors, writers, magazines and news channels have been giving the Apple Watch massive coverage while all the competitors are trying to get some awareness of their product. 

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Natural Gas ($NATGAS) Had A Very Big Week And The Stocks Look Tasty

I have been writing about energy stocks declining for so long, maybe this is just a shot at trying to be optimistic. While preparing for the webinar last week and this week, Natural Gas jumped out at me because of the similar low to 2009. The base in Natural Gas is potentially setting up for a primary trend right shoulder. I also noticed the huge percentage gain in $NATGAS this week after Friday's close. Then to top it off, I have invited JC Parets to present to the Calgary Chapter of the CSTA in March. I was on his website on Saturday and noticed he had an article about $NATGAS. The stars are aligning, let's do a drill down. Let's look at the very long term chart first. For those readers who only buy 52 week highs, this is a little early!

Looking at the SPURS in purple, we can see that Natural Gas has trended down for years. We can also see that this is very low in terms of relative strength on this 20 year chart. The price chart is what caught my eye the most. Wyckoff did some tremendous studies on bases. One of the things he discusses is a final flush to get rid of weak hands. Well, $5 to $2.50 in three months probably gets the job done. Of course we never know if it is a 'final' flush till we get some time to the right of the low. The phrase Wyckoff uses for the final low is a 'Spring'. From this low it should bounce sharply higher. One of the problems with the base in $NATGAS is the $6 surge does not fit into the Wyckoff 'base' analogy. The price was only above the $5 level for 6 weeks through a 250 week base so perhaps we can call it an outlier.

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The Canadian Banks Arrive At The Water Valley Decision

Is this a new Canadian Bull Market? I took a field trip to Water Valley and had lunch in the only restaurant in town, the Water Valley Saloon. Yes, when you're west of Highway 22, you can literally step out of anything modern and arrive at the 1920's.  I found it so interesting that they had bull moose horns on the same wall as a black bear skin. Much like the market, pick your view! Water Valley is a special location because of the stunning beauty of the rolling foothills in front of the Rocky Mountains, It has also been a hub for old oilfield reservoirs that are being drilled out with horizontal drilling. The restaurant was pretty quiet. There were only 4 oilfield service people having lunch which is very slow for the restaurant.  I didn't see any oilfield trucks on the 1 hour drive either direction. (I did see logging trucks though!)

So that brings me to my next question that I am trying to wrap my head around. After my series on Market Manias, when one industry collapses, we see the effects slowly roll through other industries one by one. Now that oil has had a bounce, I expect some of this oil run up to unwind. Currently, some stocks are making higher highs, but others are letting go already. So let's roll this around to the banks. 

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We Didn't See That Coming - $USD & $TYX Start The Sequel

Currently, the $USD high is January 26th, 2015 which is 2 days after the ECB started QE. Would the ECB announcement matter? Chart 1 shows the current situation.

Chart 1

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