Friday, February 14, 2014

Chart of the Day: Stocks vs Bonds

So where would you rather be? In the stock market or the bond market?
Here is a weekly line chart comparing the iShares 20+ yr Treasury Bond ETF ($TLT) and the SPDR S&P500 ETF ($SPY). These are two widely followed proxies for Treasury Bonds and US Stocks. We’re taking this one back 10 years to get a long-term perspective of where we are today:
2-13-14 tlt vs spy
It’s pretty clear to me that we are at the exact levels where this particular ratio bottomed out in 2007. It should be no surprise that the bond market was well ahead of the curve and started to outperform in advance of the upcoming stock market crash of 2008.
The way I learned it, when a market gets back to a historic support (or resistance) level for the first time, there is market memory there and a reaction typically occurs. In this case, we’re talking about a historic support level where the market reaction would be a bounce higher.
Now, does this have to happen? Of course not. Stocks can continue to rally to all time highs and bonds roll over to new lows. But that seems to be the consensus as I keep hearing on tv and reading on the internets that we’re in a “rising rate environment”. If that’s the case, and consensus is right, then this support should be irrelevant.
But I came into the year very bullish bonds and I continue to believe that bonds trade higher and we are NOT in a rising rate environment. I think rates continue to fall and this chart bounces nicely.
Either way, the risk/reward here seems to be in favor of the bond bulls (stock market bears) by a long shot. And at the end of the day isn’t that all that matters? Finding the best risk/reward opportunities?
What do you think? Should we ignore our supply & demand principles here? Or pay attention?
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One of the most powerful trends of the past three years could now be over

Commodity bulls are going to make a lot of money this year.
Agricultural commodity prices have fallen hard over the past three years. Some of them are down as much as 70% from their 2011 highs.
But that trend is reversing in 2014. Prices have bounced off the bottom... And many commodities are on the verge of breaking out into new uptrends.
It started last month with coffee...

The price of coffee bottomed at $1.00 last November. It hit $1.45 last week. That's the first target price we pointed out when coffee broke out in January. And it's a 45% increase in just three months.
Other commodities are starting to show the same sort of potential. Look at this chart of the PowerShares Agricultural Commodity Fund (DBA) – an exchange-traded fund made up of 17 different agricultural commodities...

DBA has broken out to the upside of a long-term falling-wedge pattern (the blue lines). It's approaching its first resistance level at about $25.70. That's a logical place for the price to pull back a bit after such an extended move higher.
Traders should use any decline back down toward the breakout point of the wedge at $24.50 as a chance to buy. A breakout move from this sort of long-term wedge pattern often signals the reversal of a bearish trend into a bullish trend. And it usually leads to much higher prices.
Over time, DBA should approach its 2013 high near $28 per share. It may even challenge its 2012 high at the top of the chart, just above $30.50 per share.
Agricultural commodities have quietly kicked off a bull market this year. Traders should be looking to buy on any pullbacks.
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This Is How Quickly Gold Will Smash Through $1,925 / February 13, 2014
With markets continuing to see some volatile trading, today James Turk spoke with King World News about backwardation in gold and how quickly the price of gold will smash through the all-time high of $1,925.  Turk also warned that the shorts must be getting “frantic by now” because of the action in gold.
Turk: “Gold finally plowed through $1250, Eric, and we got the expected move higher.  The central planners tried ‘circling the wagons’ at $1,275, but they could not hold that line — there was just too much buying power behind gold’s surge….
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Silver is Setting Up to do Something Here Soon

Chart 1: Silver is a critical decision point and the pressure is building…
Source: FinViz (edited by Short Side of Long)
I have been holding a view that Gold and Silver still haven’t bottomed. Obviously, as a Precious Metal bull, it would be lovely to receive a surprise where both of these metals start rallying to the upside. However, the double bottom patterns look super weak, in particular with Silver. But that is just my opinion, not a fact.
The facts are that Silver remains in a downtrend, with sentiment at extremely negative levels and the metal oversold. So far, there has been no sign that the downtrend is turning around. So what is the next major move for the metal?
We do not need to guess, as the price of Silver is about to tell us what is going to happen soon enough. The chart above shows a huge pressure cooker building, with resistance only a dollar on the upside and support about a dollar on the downside. This triangle is about to find a resolution, so as bulls and bears fight it out over the coming days, make sure you keep a close eye out on this one!

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ITT Corporation designs and manufactures engineered critical components and customized technology solutions for the energy, transportation, and industrial markets. The company operates in four segments: Industrial Process, Motion Technologies, Interconnect Solutions, and Control Technologies. The Industrial Process segment manufactures industrial pumps, valves, and related equipment comprising vertical, axial flow, multi-stage, and other pumps; twin screw pumps, multiphase boosting system pumps, and progressive cavity pumps; and process valves, including industrial knife-gate and sanitary diaphragm valves. The Motion Technologies segment manufactures engineered and durable components comprising brake pads, shock absorbers, and damping technologies for the transportation industry. The Interconnect Solutions segment designs and manufactures engineered connectors and cable assemblies for applications in harsh environments. The Control Technologies segment provides engineered aerospace components and industrial products consisting of fuel management, actuation, and noise absorption components in the aerospace market, as well as a range of products that manage motion and absorb energy in various industrial markets.
To review a current H&S pattern on ITT’s stock, please take a look at the 1-year chart of ITT (ITT Corporation) below with my added notations:
1-year chart of ITT (ITT Corporation)
ITT had rallied from a low of $25 last February to a peak of $45 just last month. Over the last 3 months the stock had created a very important “neckline” of support at $40 (blue). Above the neckline you will notice the H&S pattern itself (red). Confirmation of the H&S occurred earlier in the week when ITT broke its $40 “neckline”. So, the stock should be moving lower overall from here.

The Tale of the Tape: ITT confirmed a head & shoulders pattern. A short trade could be entered on any rallies up to or near the $40 area. A significant break back above $40 could negate the forecast for a move lower.
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Chart of the Day - Equity Lifestyle Properties (ELS)

The Chart of the Day is Equity Lifestyle Properties (ELS). I found the stock by sorting today's New High List for frequency in the last month, skipped over the stocks that didn't have positive gains for the past week and month then used the Flipchart feature to review the charts. Since the Trend Spotter signaled a buy on 1/3 the stock gained 8.37%.

Equity Lifestyle Properties, Inc. (ELS) is a self-administered, self-managed, real estate investment trust.

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