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Sunday, August 31, 2014

Review of Gasoline: Falling Gas Prices Save Labor Day Weekend

As expected, headlines about falling gas prices saving the consumer and labor day weekend are numerous. While the 'reasons' to jump for joy at the pump range from a relative calm hurricane season to high production rates in the US, they most ignore the most important one - gasoline has been in bear phase (positive to negative DI oscillation) since April 2014. The message of the market, an often ignored reason, is far less attention grabbing than supply disruptions out of the Middle East or squirrels causing massive maintenance issues at US oil refineries.

While consumers and bearish traders celebrate, they should be watching invisible hand closely. Diligent insight readers know that current expectations and message of the market (see below) rarely match.



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Saturday, August 30, 2014

Diffusion Charts Updated 08/26/14

DI Charts


    Bond DI Chart
    Major Currency DI Chart
    Gold DI Chart
    Silver DI Chart
    Copper DI Chart

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Friday, August 29, 2014

COT Matrix Updated 08/26/14

COT Matrix


COT Matrix

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Review of US Stocks

The rally that continues to defy bearish expectations has broken trendline from August low. This minor technical break that marks the onset of profit-taking and bearish headlines following price increases the probability that path of least resistance has turned down over the short-term. The 8/25 gap, formed 1.37 billion shares, is the first layer of support. The 8/18 gap, formed on 1.56 billion shares and the zone that jumped the creek of resistance, will be more difficult to break.


Chart


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Review of Crude Oil

The bulls, ignoring extreme negative concentration – bearish setups from mid June to mid July, were confident the price would jump the creek of resistance (chart). The steady decline since then has quieted them and awakened the bears.

The bears, reluctant to show their teeth in the face of strength, are starting to growl about bigger decline ahead. Their confidence will grow as price breaks the ice of support.



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Thursday, August 28, 2014

Russia Cancels 6th Bond Sale as Yields Climb on Ukraine Tension

Follow the money! The inability to sell debt/raise money only augments Putin's need to create an external enemy to hide Russia's economic decline. This goes for NATO economies as well. In this case, the external enemy is Ukraine as a proxy for more powerful enemies. These types of vicious cycles, a common occurrence throughout history, tend to end badly for both sides.


Headline: Russia Cancels 6th Bond Sale as Yields Climb on Ukraine Tension

Russia canceled its sixth ruble-bond auction in a row after the government’s borrowing costs climbed last week amid continued tension in Ukraine.

The Finance Ministry pulled tomorrow’s sale, citing “unfavorable market conditions” in a statement on its website. The yield on 10-year ruble-denominated bonds climbed nine basis points last week to 9.36 percent. The rate fell six basis points to 9.31 percent as of 3:27 p.m. in Moscow as President Vladimir Putin prepared to meet with his Ukrainian counterpart.


more

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Review of Lumber

Lumber has tested gap support as support on expanding volume (chart 1). This suggests increasing downside force and increases the probability at least a retest of this zone and/or continuation of the downward wave within a larger positive to negative DI oscillation (chart 2).  The chart below illustrates the layers of support that could be challenged over the short-term.  Any test of support on decreasing volume suggests waning downside force and supports continuation of the up trend.

Chart 1




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