Weekend Chart Porn

Yesterday I actually spent a few hours looking through some of my favorite chart sets. Things are interesting to me again technically for the first time in quite a while. I updated a few charts and published some of them online on Stocktwits and TradingView. My bio has links to these sites if you are interested in following me there.

Price is Truth is many things to me, and from time to time I may post market related topics because they are of interest. Many of my newer followers found me through poems, or photographs, or writings about my life challenges and I am thrilled to have you reading my words. You may not even be aware that I started this blog to document my market thoughts and experiences. Over time it has morphed into something a bit different but deep down I still have an interest and passion for financial markets and technical analysis.

It’s like an artist that puts her brush down for a spell, eventually she gets the urge to paint again. So I feel currently about charting. To that end, below are a few that I worked on this weekend.

What am I looking at here?

To those who don’t typically look at price charts these may look like chicken scratch but many of them have some notes that you can read to try to figure out what I am doing. If you have any specific questions, feel free to leave a comment and I’ll do my best to answer you. Please note that my analysis is not to be construed as investment advice. Click on charts to enlarge.

VIX weekly seems ready for move higher.

VIX weekly seems ready for move higher.

 

The first chart I have for you is that of the VIX index. This is commonly referred to as the “fear index” since it tracks the market’s expectation of 30 day volatility of prices. It is constructed using the implied volatilities of a wide range of S&P 500 index options. When the VIX is low the market is said to be complacent and when it is high there is fear among investors. This chart suggests that after a multi-year “base” or consolidation that the VIX is ready for a foray to higher levels soon. This would correlate to a corresponding market swoon. Timing would be spring-summer of this year based on the chart pattern.

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Bonds making a classic W bottom. Higher prices likely.

 

The next chart is that of the exchange traded treasury bond fund TLT. This liquid ETF blends the 10 and 30 year Treasuries into what they call a 20+ year Bond Fund. I use this as a proxy for the US Treasury market (specifically the 10 and 30 year bonds). Typically as equity prices increase, bond prices decrease. This is due to market participants wishing to gain greater capital appreciation from rising equity prices and the lower yield to maturity that bonds offer when treasury prices get high. Last summer when the Federal Reserve hinted that they would “taper” or reduce their monthly treasury purchases the bond market sold off and a parabolic bubble began in stocks. The problem is that now the average dividend yield on the S&P is under 2% and the TLT pays out over a 3% yield. At some point Treasuries become attractive again relative to equities since they are backed by the full faith and credit of the US Govt. and it’s ability to force citizens to pay income tax to raise capital to pay back it’s debt. Stocks hold no such backing and are much higher on the risk spectrum. When valuations in stocks are high as they are currently, this is an issue that money managers will consider when constructing their portfolio mix.

Crude completed a bullish fractal and now looks poised for lower prices.

Crude completed a bullish fractal and now looks poised for lower prices.

 

Next up is a chart of Crude Oil. Specifically WTIC or West Texas Intermediate Crude or Texas Light Sweet. This is the benchmark grade for US Oil prices. Europe has it’s own benchmark called Brent Crude. Oil prices are tied into economic expansion and contraction and only a robust economy can withstand rising oil prices without causing a natural dampening of growth through higher input and transportation costs for manufacturers, less disposable income for households due to rising gasoline prices, etc. What this chart is telling me is that oil prices have likely topped out near term and look to at least test recent lower levels around $90 per barrel. This is a chart to continue to watch- if prices break lower this could signal a slowdown in the economy and possible deflationary forces exerting upon commodities.

ES futures (S&P 500) may be carving out a topping pattern with a July low.

ES futures (S&P 500) may be carving out a topping pattern with a July low.

 

The last chart I will post is that of the Emini futures. This is the most liquid of the S&P futures contracts that trade out of the CME (Chicago Mercantile Exchange). I have had these trend lines in place since last summer without adjusting them and price is looking currently like it may be carving out a head and shoulders top. This is still to be confirmed and frankly that is pure speculation on my part. However, I am basing my theories upon not just the price action in the index itself but in looking at different indexes, sectors, breadth indicators, currencies, and commodities. Only in looking at many different inputs can you hope to gain any accurate timing of the markets.

Based on everything I am seeing, I would not be at all surprised to see a 15-20% market correction this spring/summer to be followed by a decent rally. Once that rally happens we will have a greater idea if the market can make higher highs into 2015 or if the great bull run of 2009-2014 has topped out.

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