I find this chart interesting, for a couple of reasons. It is also just a little bit odd.
I’ve got QQQQ the Nasdaq 100 big tech names as the price ticker. Compared to GLD gold ETF, JJC copper ETF, SPY the S&P 500 benchmark ETF, and USO a US Oil ETF.
There’s a couple of interesting bits.
For starters, look at the gold colored GLD line for gold. Notice when it pops up and dips down. In trading there is often a ‘sell one thing to buy another’ behaviour. Often one of the things is money from a Central Bank somewhere that’s handing out money on the cheap. At times in the past when the Bank Of Japan (BOJ) was the only near zero rate in town (or on the globe) the yen would move counter to stock swings as the giant traders of the world were moving money out of yen, into dollars to buy US Stocks, then on sale, shift those dollars back to yen to pay back the margin loan. These loans are called the ‘carry trade’ and are gigantic in size. Yet here we see gold doing the swing. I wonder who has their bank account held in gold?…
The other possible is that they are doing a “long / short” hedge going long gold and short stocks, or long stocks and short gold, in a hedge of some kind. But I can’t imagine what you would be hedging in that case.
Next, notice that JJC copper has been in a long and continuing down run. Yet at the near end in time it has had a ‘failure to advance to the downside’ as it bounced of the same price twice. It looks like it is about to ‘retest’ for a 3rd time. We may well have a bottom in in copper. Time to start watching the metals more closely. Even with very low demand (that long descent) eventually enough more expensive production gets shut-in that prices hit a bottom as folks just won’t make any for less than that price.
Next look at USO. Oil ETF in the USA. As it is based on various kinds of contracts I’d not use it for very long term trends (options have ‘shrinkage’ over time…) It has dropped even more than copper. But it has the same “crash, bang, tinkle” three dips at the recent end. Though with a ‘higher low’ and not just a ‘failure to fall’. Oil, too, is looking bottomed. (Being bottomed is no guarantee of a rise… especially in commodities. It can just be a new stable floor.)
These two are both key factors in running a modern economy. That they are both, at best, laying on a bottom is not saying good things about the real economy and actual production / demand.
Now look at the blue SPY line. It is just under the QQQQ, but has not yet passed the peak of a few months back. QQQQ has. The money is going into tech, while the broader market is not as energetic. (RUT the smaller caps Russel 2000, is even worse as are DIA the Dow Jones Industrials. Not on this chart as it was getting a bit cluttered). So of all the market, a few tech names are doing the lifting.
I think it will be very hard to make a full economy out of Apple, Twitter, Google, and Facebook… no matter how hard you try.
Next, take a look at volume the last few months. BIG spike on that drop in prices. Modest rise on the October drop. Weak volume on the price rises each side. This latest run up has been on even weaker volume. Notice the ‘average line’ over those drops. Makes a couple of ‘holes’ over the volume bars? I call those “eyes”. One of my ‘worry now’ indicators is “two spooky eyes” as volume has a double drop out with a volume spike on a couple of down days in the middle. I think we’re pretty close to that with the dip mid Sept and mid Oct. I’m not liking prices spiking up on very weak volume. Smells like market makers unloading inventory at high prices via hype preparatory to the short play spike down.
For DMI+ the blue line in the very bottom, it is crossing the ADX black line. DMI crosses ADX just before a change of trend. For MACD look at the histogram part (black blobs on the zero line). It shows how the two Moving Average Convergence Divergence is shaping up. A tangent to that black blob rolled over flat about a week ago and the convergence is increasing (black is shrinking toward zero). Again, that happens before a reversal of trend. (It also happens if a trend weakens, but continues a lot slower).
None of this makes me feel all that good. A flat / toppy market, making a final hurrah run up on flagging volume, narrow breadth (only tech) making the big move, and fundamental commodities needed in any active economy dragging along a bottom, at best. Doesn’t make for a good growth expectation just right now.
Add in The Fed doing the Rate Hike Strip Tease and it just makes for a nervous market ready to run for the doors at the drop of a rate hike. Mostly big money traders doing the trading dance (gold vs stocks movement) and even that mostly showing up in the QQQQ vs gold not in the SPY vs gold, so even they are playing a smaller set of the whole.
As I said before, at this point my stocks are sold and it is all sitting in cash. I don’t have an investable thesis at this point, nor do I have a decent trade vehicle lined up. We might be close to bottom fishing in basic commodities, or we might be looking at a short in “something”, or perhaps some other decent trade. I’ll do some more looking over the weekend. (Right now I’m waiting the settlement period post sale before I can do anything more anyway). But with transports clearly rolled over, Paris preparing to crush global economies, The Fed wanting to spank anyone with loans (which is most of the world), and the real economy globally in trouble (with China on Central Committee life support) I’m happy to take my time about it. Besides, with withdrawals from the IRAs for “food and fuel”, the trading pot has gotten a mite smaller over the years. That tends to lead to a bit more caution about ‘gambling’ with it.