Random Analysis of Indices, ETF's, Power shares etc.

By: Sol Palha | Fri, Dec 29, 2006
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"We live in the present, we dream of the future, but we learn eternal truths from the past." - Madame Chiang

We first examined this list on July 4th and then on Nov 7th
Symbol Positive Divergence
Negative Divergence
Hourly charts Daily charts Hourly Charts
$INDU No No We have a huge array of negative divergence signals on the hourly charts and now the daily chart has flashed a negative divergence signal.
$DJT Yes. Actually it went on to issue a double positive divergence No No on the hourly charts but we do have an open negative divergence signal on the daily charts which indicates that there is still more downside here.
INTC No Yes Several back to back negative divergence signals on the hourly charts
SMH No Yes Several negative divergence signals on the hourly charts.
PPH No Yes New series of negative divergence signals flashed on the hourly charts in the last 18 days. Close to flashing one on the daily charts.
IBB No Yes Several negative divergence signals on the hourly charts.
$ECO Yes. Double positive Yes on the daily charts. No
NENG Invalidated No Yes. This means that it should rally close to the recent highs and then correct. Hence if you took a position in this play sell and lock in your profits. Nov 07, 06
As envisioned it has rallied to its old highs so traders with positions should close them with nice gains. We also have several negative divergence signals on the hourly charts.
$XOI Yes No No
CHK Yes. No No
IIH Invalidated Invalidated Negative divergences on both the daily and hourly charts so take profits and close position.
PXN Invalidated No Several negative divergence signals on the hourly charts.
DGT Invalidated No Series of negative divergence signals on the Hourly charts.
MSFT Invalidated Yes Several negative divergence signals on the hourly charts. Very close to issuing one on the daily charts.
IYH Invalidated Yes Yes on the hourly charts and just flashed one on the daily charts.
EWU Invalidated No Yes. 3 negative divergence signals on the hourly charts and very close to flashing a negative divergence signal on the daily charts.
IJR Invalidated No Series of negative divergence signals on the Hourly charts. A new negative divergence signal was just flashed on the daily charts.
EZU Invalidated No Yes several on the hourly charts. .
EWW Invalidated No Several negative divergence signals on the hourly charts. A new negative divergence signal on the daily charts was just flashed.
EPP Invalidated No Several negative divergence signals on the hourly charts.
QQQQ Invalidated Yes major positive divergence signal flashed Yes. Several negative divergence signals on the hourly charts. Looks like the correction will provide another buying opportunity.
$SPX Invalidated No Yes. Series of negative divergence signals on the Hourly charts. Very close to flashing a huge negative divergence signal on the daily charts.
$OEX Invalidated No Yes. Series of negative divergence signals on the Hourly charts. Very close to flashing a huge negative divergence signal on the daily charts.
IGN Invalidated No Yes. Series of negative divergence signals on the Hourly charts.
EWZ Invalidated No Yes. Series of negative divergence signals on the Hourly charts.
$OSX Invalidated Yes. One of the few markets with a positive divergence signal flashed on the daily charts. The current pull back therefore is nothing but a buying opportunity. Yes. Series of negative divergence signals on the Hourly charts.
$NYSE Invalidated No Yes. Several negative divergence signals on the hourly charts. It is very close to issuing a large negative divergence signal on the daily charts.
$DWC Invalidated No Yes. Several negative divergence signals on the hourly charts.
EWN Invalidated No Yes on the hourly charts, if the TA indicators can move up a little bit more then the negative divergence signal on the daily charts will be invalidated and the markets in the Netherlands should just experience a normal correction.
EWL Invalidated No Yes on both the hourly and daily charts.
EWA Invalidated No Yes on the hourly charts, on the daily charts it was temporarily invalidated but if the TA indicators do not move soon another large negative divergence signal could be flashed.
EWT Yes No No negative divergence on the hourly chart but a rather big negative divergence on the daily chart. We would avoid the Taiwanese markets for the time being.
EWO Invalidated   Yes both on the hourly and daily charts
EWI Invalidated No Only on hourly charts. Negative divergence signal on the daily charts was recently invalidated. .
EWD Invalidated No Only on hourly charts. Negative divergence signal on the daily charts was recently invalidated. So it should do well after a pull back.
EWK Invalidated No Only on hourly charts. Negative divergence signal on the daily charts was recently invalidated. So it should do well after a pull back.

Double positive divergence means that two back to back positive divergence signals were generated. Green denotes the index has gained in value since the signal was flashed. Red means the index lost value. Blue means the index etc was just added to the list hence no results are available. Invalidated means that the positive divergence signal on the hourly charts or daily charts is no longer valid depending on what column it appears under.

Negative divergences: A yes means it has taken place on the hourly charts only unless otherwise specified.

Conclusion

This analysis provided us with some rather valuable information back in June and it was one of the reasons we stuck our necks out and stated that the Dow would most likely go on to put in a new series of highs. In June almost all the issues examined above were flashing positive divergence signals on the hourly and daily charts and most of them are trading significantly higher now. However look how the picture has changed now almost all of them are flashing negative divergence signals on both the hourly and daily charts.

We therefore believe that the current sharp pull back is a fake trap for all the dumb money and that we should witness a rather massive short squeeze in the not too distant future that might push the Dow to a new all time high. It's then when everyone is feeling smug having so easily forgotten what took place in the months of May and in June that the markets will be ready to embark onto a brutal correction. Market update June 14, 2006

We believe that there is over an 81% chance that the market has now put in a tradable bottom. Market update June 20, 2006.

The situation looks bad, the crowd is frothing, the Market pundits are spewing negative news constantly and it looks like all hell could break lose any time. We must remember the proverbial old saying, which states that markets usually climb a wall of worry to which we added the following and crash down a cliff of Joy. Since everyone appears to be worried we have to remain calm and study the action carefully. Our analysis reveals that for now the best stand is to remain bullish. Market Update June 28, 2006.

The Dow needs to break past 11220 on very good volume and stay above this mark for 9 days. If it can do this there is a very good chance that it will test its old highs and then go onto put in a new all time high.

We continue to believe that the NASDAQ will be the biggest gainer when the markets enter the full rally phase. Marketupdate August 1, 2006.

The current analysis leads us to believe that on a world wide basis the markets are frothing, there is just too much money sloshing into the financial markets and a nice breather is needed now. We will have to see how the international markets react as they will provide valuable info on how the markets here in the United States will react. If the overseas markets start to crash then we can more or less expect the same thing here. Right now it looks like the Dow is due for a pretty decent pull back. This pull back though has taken quite a bit of time to manifest itself and when it does it will start very suddenly.

Random Musings

Housing problems

Another ominous warning sign that the housing meltdown has only begun and not ended is the huge drop in the practise of taking home equity loans. This is how most of the masses have been leading their lofty lifestyles and buying stuff with money they don't really have. Now that house prices are falling they are running scared and the worst part is that their bill has actually increased significantly. To put things into perspective there was 52% drop in home equity loans in the 3rd quarter; total withdrawals slid from 235.9 billion in the 3rd quarter of 2005 to 113.5 billion in the 3rd quarter of 2006. Expect this to drop even more by the end of this quarter. Things are not getting better as the press and top economists would have you believe they are actually getting worse.

Late Mortgage payments

According to the Mortgage bankers association (MBA) late payments and foreclosures rose in the 3rd quarter and this trend is expected to continue as a huge number of adjustable mortgages reset in the next couple of months. When these mortgages reset the monthly payments are going to go up significantly; to make matters worse those that have already fallen behind will pay even higher rates because their credit rating has already fallen. Expect the number of foreclosures to increase substantially next year; foreclosure rates could hit new 3-6 year highs. The biggest increases will be in the former red hot markets of Florida, New York, Arizona, California, etc. Our advice for over 2 years for those who had more then one home was to sell one or more; risk takers were advised to sell their existing homes and rent. The MBA predicts that a whopping 1.1 to 1.5 trillion worth of loans will reset next year; 700 million of this amount will be refinanced and up to 800 million will adjust at less affordable rates. The fireworks are going to begin sometime next year.

Inflation

The big theme now is to state inflation is under control but that's one of the biggest lies out there. Note how the so called soft commodities have exploded in price (grains, sugar, coffee etc); these markets are the last to take off but when they do there can be no doubt that inflation is starting to run and all it takes is a small push in the right direction for it to run wild.

Economists had been expecting a rebound in wholesale prices following two months of big declines. However, the 2 percent jump was four times bigger than the 0.5 percent increase they had forecast. Even excluding volatile energy and food prices, core inflation posted a 1.3 percent advance, the biggest jump in 26 years. Full Article

The above story clearly illustrates that inflation is not in check and that the press and the top economists are either consuming large quantities of mind altering drugs or they are completely asleep at the wheel.

The story below provides one clue as to what could be the ultimate trigger for a possible hyperinflationary move in the United States.

President Vladimir Putin said Wednesday that a ruble-denominated oil and natural gas stock exchange should be set up in Russia. Speaking before both chambers of parliament, cabinet members, and reporters, Putin said: "The ruble must become a more widespread means of international transactions. To this end, we need to open a stock exchange in Russia to trade in oil, gas, and other goods to be paid for with rubles."

"Our goods are traded on global markets. Why are not they traded in Russia?" Putin said. Full Story

We have been stating for sometime now that Russia is looking to deliver some sort of massive blow to the United States and thus severely cripple it. All the natural resources are being brought under State control and they are aggressively buying interests in commodity based companies outside Russia. One of their main strategic moves was to take control of Still water mining (North America's largest Palladium producer) and thus control over 70% of the worlds Palladium supply. They bought controlling interests right around the time SWC was putting in a long term bottom and thus were able to pay a measly 7.50 per share. They are now trying to do the same thing in Western Europe. If the above exchange is opened it will destroy the dollar as Russia will start to sell oil in Rubles and it will bring the Ruble to the forefront of the currency markets. In one move Russia will suddenly move its currency from the bottom of the barrel to almost the top of the barrel. Then other nations such as Venezuela and Iran will follow suite and this will add even more pressure to the dollar.

Do not forget that disaster always bring about great opportunities; those positioned in the right sectors will make money regardless of whether they are dollar based or not as oil, gas, coal, and other commodities based stocks will gain 3-15 times as much in value.

"One problem with gazing too frequently into the past is that we may turn around to find the future has run out on us." - Michael Cibenko

 


 

Sol Palha

Author: Sol Palha

Sol Palha
TacticalInvestor.com

Sol Palha is a market analyst and educator who uses Mass Psychology, Technical Analysis and Esoteric Cycles to keep you on the right side of the market. He and his partners are on the web at www.tacticalinvestor.com.

The information contained herein is deemed reliable but no guarantee is made about its completeness or accuracy. The reader accepts this information on the condition that errors or omissions shall not be made the basis for any claim, demand or cause for action. Any statements non-factual in nature constitute only current opinions, which are subject to change. The author/publisher may or may not have a position in the securities and/or options relating thereto, & may make purchases and/or sales of these securities relating thereto from time to time in the open market or otherwise. Neither the information, nor opinions expressed, shall be construed as a solicitation to buy or sell any stock, futures or options contract mentioned herein. The author/publisher of this letter is not a qualified financial advisor & is not acting as such in this publication. Investors are urged to obtain the advice of a qualified financial & investment advisor before entering any financial transaction.

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