pravda analytics technical monthly review for january 2017

Pravda Analytics Pravda Analytics

Pravda Markets Report Technicals Monthly

January 2017 Edition

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Market Index Overview

S&P 500 (SPY) index – as of close on Friday 1/6/17

Markets continue to consolidate near highs as we enter the new year. See additional notes below:

Don’t forget the big picture and observe the monthly chart


Market Direction Confirmation via Transports Sector Observation as per Dow Theory

Key premise of the theory states that both the broad equity market index as well as the transports index need to align in market direction to confirm a bullish or bearish trend. (additional rules apply)

Dow theory

Market Direction: Bullish

Dow Jones Industrial Average (DIA) is above key moving averages.

Dow Jones Transports Average (IYT) is above key moving averages.

Current Analysis

A confirmed bullish market is when:

Both indexes are exhibiting higher price peaks and valleys on long term charts

Both indexes are above their respective 200 day moving average (orange)

Additional level of confirmation: index above 50 day moving average (blue)

The Approach

Dow Jones Index Transports Index

Transports and the Dow are holding strong above both key moving averages indicating a Bullish environment.


Inverse Put Call Ratio

A unique oscillating indicator based on options activity coupled with a Bollinger Band to view overextended signals.

Options activity is neutral as the put-call ratio is close to 1 and in the middle if the range.


Social Media Sentiment

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S&P 500 BONDS GOLD

The sentiment chart shows the percentage breakdown in bullish and bearish sentiment shared by StockTwits users over time. It is calculated on a rolling, 7 day basis.

The good people of the StockTwits are extremely bullish Bond and Gold.


Currencies

A look around the world


A Closer Technical Look - Bonds

Bonds are breaking down as Equities rally in lieu of a developing interest rate environment.

1) Bonds rebound in the new year but still are well inside the established range (blue and red lines)

2) The 200 day moving average is overhead at 112 and may act as resistance of the recent rally. However, the bond bulls have finally established a short term bullish crossover confirmation* on 1/5/17.

3) Additional resistance overhead is at the November gap indicated by red lines (tier 1 and tier 2)

*short term crossover confirmation: a direction short term trend signaled by the shorter term moving average (8 day – thin red line) crossing above or below the longer term moving average (21 day – thin blue line)


A Closer Technical Look – Oil

Oil continues to slowly grind higher. Break of the 52 resistance was key for bulls in breaking out of the range bound trading. That 52 area is now viewed as support and should not break if the bulls continue to push price up. Price is currently above all long and short term moving averages.


A Closer Technical Look - Gold

Gold continues to correlate with the bond market and similarly underwent a sharp recovery since mid December lows.

1. Some heavy resistance is ahead as gold moves closer to a declining 200 day moving average (blue line).

2. A bullish short term crossover confirmation* is forming after the gap up to 112.5 level (blue arrow) in the first week of the year.

3. Overall gold is still shuffling between some key moving averages.

4. Special attention is to be paid to overhead resistance like the 200 day moving average (blue line) and the red tier 1 resistance line at 115.3.

*short term crossover confirmation: a direction short term trend signaled by the shorter term moving average (8 day – thin red line) crossing above or below the longer term moving average (21 day – thin blue line)

Note: below is the GLD gold ETF chart as opposed to the /GC gold futures contract which is a x10 price multiple.


Hook of death

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10-Year Treasury Constant Maturity Minus 3-Month Treasury Constant Maturity.

Inverted yield curve often precedes a major market decline. So far so good.


Rate Watch

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Fed Funds Rate @ 0.75: market projects a 97% chance that there will not be a rate hike in February

Prime Rate @ 3.75: a quarter percent move up from a year ago

FOMC’s Rate Projection from the Dot Plot: currently projecting 2017 @ 1.50 % and 2018 @ 2.00%


Sector Analysis: year to date performance

Outperformers: Health Care and Consumer Discretionary

Underperformers: Utilities and Energy


Stock Averages

Number of Stocks Above 20-Day Moving Average

The market is in a neutral state with a near 50/50 split of stock trending up and down.


Economic Calendar

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Nonfarm payrolls rose a lower-than-expected 156,000 in December but revisions added a net 19,000 to the two prior months.

The issue is another 0.4 percent rise in average hourly earnings for the second time in three months. The year-on-year rate is now at 2.9 percent which is a cycle high. A 3 percent rate and above is widely seen as feeding overall inflation.

The unemployment rate is very low though it did tick up 1 tenth to 4.7 percent. Keeping the rate down is low labor participation, at 62.7 percent with the prior month revised down 1 tenth to 62.6 percent.


Headlines of the week

Notable covers and headlines from world’s most read publications

As Princeton economist Paul Krugman wryly noted, "Whom the Gods would destroy, they first put on the cover of Business Week."


Personal Finance - The Richest Man in Babylon

Make thy gold multiply

Make of thy dwelling a profitable

investment

Guard thy treasures from

loss

Seven Cures for a Lean Purse

Start thy purse to fattening

Control thy expenditures Increase thy

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Insure a future income

Goddess of Good Luck smiles upon those who work hard, save their money, and invest well. She doesn't really patronize professional gamblers, who always seem to end up poor

Meet the Goddess of Good Luck Five Laws of Gold (Money)

• Mentors, Books • Seminars, Experience Learn

• Business, Investment • Knowledge, Attitude, Skills

Master

Pay • Yourself first • Save 10% of earnings

Invest

• Business • Real estate • Stocks

• Scams • Trickeries • Get rich schemes

Avoid

The Richest Man in Babylon is a book by George S. Clason which dispenses financial advice through a collection of parables. Through their experiences in business and managing personal finance, the characters in the parables learn simple lessons in financial wisdom.


Investing & Trading Blueprint

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IBD's 10 Secrets to Success – great blueprint to improve your trading, investing, as well as every day activities and personal goals:

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