Blame the Weather...3.7.14

Many farmers use the futures markets to hedge the price of their crops 6 months hence and the weather is usually the biggest factor in the risk equation. Last FALL was a neutral time for energy and a bear time for agricultural....but that's changed in a big way.

Its been obvious for a while that the record bad weather this winter has given the energy sector a real push and I mentioned the possible crop apocalypse this summer...with food prices already rising on grocer's shelves in milk, meat, cereals, honey, etc.  How to play the game?

I've talked about DBA (the agriculture ETF) previously and here's a little setup on M3 looking at the relative momentum in SPY, XLE and DBA.

Just go right to the last chart....what a ride!!!!....and it may not be over yet.

Note the short term ALERT has fired................

DIA Approaches 165...3.6.14

Another up day on very low volume.  Like yesterday, XLF was the top dog in the VEGA model while XLU was well in the red.  That's bullish.

As a side note GE has been slowly building momentum after an extended period of stagnation while the SPY has risen.....an unusual situation given GE's diversification across multiple sectors and the generally high ratings by analysts.

As can be seen from the first set of equity charts below XIV has really lost its mojo relative to the SPY and we really need to see it pick up the pace if the bull run is to continue up to the targets mentioned yesterday. Economic data tomorrow may provide some volatility but in hindsight previous bad employment and productivity reports have largely been ignored by the markets as a temporary product of the record bad weather this winter.

Inside Day.....3.5.14

Looking at the SPY daily VIXEN chart shows today's chop and indecision.  It even more evident looking at the action of the XIV on the SPY Trader chart

On the VEGA sector model XLE was the big loser and XLF was the winner.
Volume was luke warm at best confirming suspicions about short covering yesterday.
Note that QQQ and XLF were the Vega leaders...a reinforcement of my previous comment about XLF being a possible breakout candidate.

That being said, while we may be stalled here for a bit while Putin rethinks his Ukrainian options. the statistical likelihood is that SPY will see 190 (S&P 1900)  and the DOW will revisit 16,500. 
The markets love these meaningless whole numbers and time and time again we have seen momentum carry prices to whole number levels when there was no apparent justification.....just an observation from someone who has watched the markets every day for over 25 years.

While the markets are showing pockets of weakness there are also pockets of strength and the bottom line is SPY and QQQ are slowly inching upwards.....the ongoing trend until proven otherwise.

New SPY High...3..4.14

After shedding 153 points yesterday SPY came roaring back with a 227 point gain today and a new high. Tentative volume may reveal a lot of short covering responsible for today's pop...most politicos (and traders) were surprised by Russia's apparent quick retreat on the Ukrainian situation.

Tomorrow will be a better gauge of whether today's momentum was actually bull driven.
It was an up day out of the gate with no looking back.

The XIV gained 6% and the VIX lost 11% for the day.....a look at the daily SPY Trader shows the XIV has not participated in the rally to the same extent as underlying securities.....a reason to be wary of the rally momentum...

Commodites Poised...3.3.14

As the markets climb the Ukrainian wall of worry this seemed like a good time to review how our old commodities model was holding up.  In this case we look at the weekly model going back 7 years and the results are clearly better than SPY from a variety of perspectives.
Note the severe drawdown periods in 08 and 10....following the simple P6 equity curve stop would have avoided a temporary 20% drawdown in each case.

This main driver for much of these gains has been UNG (natural gas), the same driver that provided the gains in the M# energy model posted last week.....this is just a longer term look using a wider field of commodities than just energy.

Next likely rotation is into DBA, the agriculture sector, which has already seen some spectacular gains recently.

With the VIX rising 15% today and the XIV crumbling 7% we're beginning to see a return to the VIX/XIV pair skew that has been out of balance for a while.  Nothing like a good market shakeout to set things straight.  Here's the view from Adam Warner on the situation:

New Highs...But........3.1.14

Friday's midday new highs in SPY and QQQ were reversed by concerns over potential new Russian intervention in the Ukraine situation.  It's always something.

And, despite new highs in the SPY the XIV volatility inverse has been a real laggard and not supported the validity of the on-going rally. Is this an omen of impending trend reversal?  We'll just have to wait and see....but the XIV / VIX skew is not typical. 

With many of the talking heads dismissing bad earnings and employment data as outlier events due to the uber lousy winter weather that continues to take its toll the markets seem bound and determined to continue to rise.....until they don't and then the same talking heads will completely reverse their positions and forget everything they ever said before.

As usual, we'll just follow the money management stops and protect our capital.
Per the P6 (last chart at bottom) M3 SPY has been in cash since 2/20.

Bullish Surge......2.27.14

It was a strong day out of the gate and continued in that mode for the entire session.  The SPY TrendX is again bouncing against overhead resistance after a couple of sideways days and SPY is still poised to make a break...one way or the other. 

XIV did not participate in the rally today......in early going both the VIX and XIV were in the red.

The emerging markets really caught fire today (EEM and SCHE) and are worth keeping an eye on.
SCHH (REITS) are also worth a look in light of the positive real estate reports today.