Tuesday, February 4, 2014

Charles Nenner: This Is Not a Major Correction

by James J Puplava CFP
Financial Sense

Jim welcomes back noted technician Charles Nenner, Founder & President of Charles Nenner Research Center. Charles sees some risk to the markets into early February, but does not believe this is the start of a major correction. He believes the stock market should do well in the first half of 2014. Charles also doesn’t see the stock market as overvalued at the moment, but it would be if it rises another 10%. He sees bonds experiencing a bounce currently, which should top out soon. Also in this segment, Jim has this week’s Market Wrap-Up, filling in for Ryan Puplava. Erik Townsend covers the commodities markets and Rob Bernard has the Fixed Income Report.
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Stocks Too Volatile For You? Buy This Instead

As we all know, the goal of trading is to make money. But sometimes traders think like analysts, and being right about a market's direction overshadows the primary directive -- making money. So when the stock market gives us fits and starts, and crosscurrents like emerging markets and the Federal Reserve make equities treacherous, it makes sense to look for other opportunities.

As they say, there is always a bull market somewhere, and right now, it looks as if the Japanese yen is in the early stages of one. And for those who cannot or prefer not to trade spot currencies or futures, the CurrencyShares Japanese Yen Trust (NYSE: FXY) provides a liquid way to play.

I will leave the fundamentals of the Japanese economy to others to analyze. From a charting point of view, there is plenty to like, and given the yen's status as a safe-haven currency, the turmoil in emerging markets and volatility domestically add additional luster.  (more)

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Long-term Oil Prices Slump Below $80

Long-term U.S. oil prices have slumped to record discounts versus Europe's benchmark Brent, with some contracts dropping below $80 in a dramatic downturn that may intensify producers' calls to ease a crude export ban.
Oil for delivery in December 2016 has tumbled $3.50 a barrel in the first two weeks of the year, trading at just $79.45 on Friday afternoon, its lowest price since 2009. That is an unusually abrupt move for longer-dated contracts that are typically much less volatile than prompt crude. For most of last year, the contract traded in a narrow range on either side of $84 a barrel.
The shift in prices on either side of the Atlantic is even more dramatic further down the curve, with December 2019 U.S. crude now trading at a record discount versus the equivalent European Brent contract. The spread has doubled this month to nearly $15 a barrel, data show.  (more)

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Embry – Global Markets Are Now Subject To Total Collapse

With continued uncertainty around the globe, today a man who has been involved in the financial markets for 50 years, and whose business partner is billionaire Eric Sprott, warned King World News that global markets are now subject to “total collapse.”  John Embry also discussed the implications of what this means for investors around the world in his powerful KWN interview.
Embry:  “I honestly believe the more I watch what’s unfolding here, the world’s leaders, and particularly their central bankers, have made such an unholy mess of things that at this point they don’t have a clue what to do….
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What’s Wrong With the S&P500?

Long time readers know that we’re not in the business of asking “why”. As market participants, knowing “why” never pays us a dime – never has, never will. The answer to the question “why” is for sell side fundamental analysts, economists and the media. They get paid to come up with reasons why. But remember none of them are direct market participants. They have other objectives: sell research, sell tv commercials, etc. And that’s great; that’s their business model.
As market participants, people who actually buy and sell assets, our main focus is on what, when and for how long. Worrying about “why” is a waste of time for us, because as I mentioned earlier, that has never nor will it ever pay us a dime. For us, it’s all about risk/reward. Where can we allocate the most money where if we’re wrong we lose a little, but if we’re right we can make a lot?
Coming into the year, the question of whether there was a good risk/reward in the S&P500 was clear. The answer was No – see here here, here and here. It just wasn’t there and there wasn’t any reason to force it. Quite the opposite in fact; the risk/reward was and has been in favor of the bears.
Here is the chart I’ve been looking at and sharing with you guys all year. It’s very simple. The peaks in prices since 2010 line up right to the highs and the 261.8% Fibonacci extension from the last correction in 2011 gave us the exact same price target.
2-3-14 spx weekly
So what’s wrong with the market this year? Nothing. This looks perfectly normal to me. And we probably have some more downside left. It looks like another 50-100 points in the S&P500, and it all seems like typical market behavior.  (more)
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Dresser-Rand Group Inc. (NYSE: DRC)

Dresser-Rand Group Inc., together with its subsidiaries, engages in the design, manufacture, sale, and service of engineered rotating equipment solutions to the oil, gas, chemical, petrochemical, process, power generation, military, and other industries worldwide. It operates in two segments: New Units, and Aftermarket Parts and Services. The New Units segment offers engineered turbo and reciprocating compression equipment and steam turbines; power turbines; special-purpose gas turbines; hot gas expanders; gas and diesel engines; trip, trip throttle, and non-return valves; and magnetic bearings and control systems. This segment also provides engineering, manufacturing, packaging, testing, sales, and administrative support services. The Aftermarket Parts and Services segment offers a range of aftermarket parts and services.
To review Dresser’s stock, please take a look at the 1-year chart of DRC (Dresser-Rand Group, Inc.) below with my added notations:
1-year chart of DRC (Dresser-Rand Group, Inc.)
DRC has been trading sideways for the last 3 months. Over that period of time the stock has formed a clear resistance level at $60 (blue), which was also prior support. In addition, the stock has also created a strong level of support at $56 (green) that has actually been support off and on throughout most of the entire year. At some point the stock will have to break one of the two levels the rectangle pattern has created.

The Tale of the Tape: DRC has clear levels of support ($56) and resistance ($60). The possible long positions on the stock would be either on a pullback to $56, or on a breakout above $60. The ideal short opportunities would be on either a break below $56 or on a rally back up to $60.
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