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Buzz on the Street: Market Bulls Watch Ukraine, Hope Putin Will Avoid Escalation
A look back at the happenings on Wall Street this week, as seen by Minyanville's Buzz & Banter.
Minyanville Staff    

These articles were originally posted on the Buzz & Banter where subscribers can follow over 30 professional traders as they share their ideas in real time. Want access to the Buzz plus unlimited market commentary? Click here to learn more about MVPRO.

Here is a small sampling of the 120+ posts seen on the Buzz & Banter this week:

Monday, March 10, 2014


Changing Trends and Divergences for Global Automakers
Debashish Bose

I compared the charts of several global automobile manufacturers, and they paint an interesting picture. I deliberately left Tesla (NASDAQ:TSLA) out of this analysis as it probably has a different set of drivers for its stock performance.

Let's start with the strongest pattern: Daimler (ETR:DAI) (the maker of Mercedes). It has a dream chart for any bull.


Click to enlarge

But looking across at its two country cousins, BMW (ETR:BMW) and Volkswagen (ETR:VOW), and a rather different picture emerges. While they too are close to highs, they seem to be showing the initial signs of distribution.


Click to enlarge


Click to enlarge

Now have a look at two of the biggest mass market automakers, Toyota (NYSE:TM) and Ford (NYSE:F). Note that the rounding top distribution pattern has been a lot more pronounced and in play for almost a year now. Are the 99% hurting more than the 1%?


Click to enlarge


Click to enlarge

Looking at two of the largest emerging markets automakers (though their sales drivers are the US, China, and Europe), Hyundai (KRX:005380) and Tata Motors (NYSE:TTM), I see divergent trends here with Tata Motors being a lot stronger and hitting new highs, while Hyundai is clearly struggling.


Click to enlarge


Click to enlarge

Aside from fundamental factors, part of it could probably be explained greater weakness of the Indian rupee (INR) relative to the South Korean won (KRW) in the past year, translating into a larger export earnings for Tata Motors.

Here is General Motors (NYSE:GM) to round it up. General Motors dipped down to its 200 DMA earlier this year, and it is bouncing back. The jury is still out on whether this is just a correction or the start of a downtrend


Click to enlarge

The auto sector has been a relative out-performer on the back of improving earnings over the past few years following the massive leg down during the financial crisis.

It has also been a good hiding ground for global investors with a risk-averse mindset as they have bet on the high return on capital trends for these companies.

Until last year, the patterns of most global majors seem to be much more in sync, but now that divergences are appearing, changes could be ahead.


Tuesday, March 11, 2014

Fuel Cells Cratering
Michael Comeau

Fuel cell stocks are taking it on the chin.

Check out the charts below. Ballard Power (NASDAQ:BLDP) is now down 11% on the day, Plug Power (NASDAQ:PLUG) is down 15%, and FuelCell Energy (NASDAQ:FCEL) is down 3%.

http://image.minyanville.com/assets/buzzbanter/charts/original/031114/BLDPN_1394557724.JPG
Click to enlarge

http://image.minyanville.com/assets/buzzbanter/charts/original/031114/PLUGn_1394557733.JPG
Click to enlarge

http://image.minyanville.com/assets/buzzbanter/charts/original/031114/FCELn_1394557742.JPG
Click to enlarge

I'm not seeing an obvious catalyst. Perhaps the Citron Research from earlier today [subscription required], which stated that Plug Power's fair value is $0.50, is inspiring some long-needed profit-taking?

The Russell 2000 (INDEXRUSSELL:RUT) has been pretty shaky, trading lower over the past week while the space was skyrocketing. I guess sooner or later, these had to break.

Let's see if the bulls fight back.


Wednesday, March 12, 2014

More on Copper
Michael Sedacca


The nine-day RSI on the Shanghai copper futures June contract hit the lowest reading in history for the contract at 6.2. Please note in the chart below that I am using the continous contract rather than front month (M4) for continuity purposes.

Additionally, there is speculation that China's commodity stockpiler, the State Reserve Bureau (SRB), was absorbing $25 billion or more of copper collateral positions that were getting wiped out last night. The copper collateral positions were held by banks and corporations.

Interestingly, the damage in copper appears to be focused in China rather than in the global futures, certainly implying that this is solely a Chinese problem. Since Monday's close, the global CME future is down 2.78% versus the 4.73% decline in the Shanghai future, though the move in the CME future is still an extremely large move

With assistance from Neil Azous at Rareview Macro.


Click to enlarge



Thursday, March 13, 2014

Levels R' Us!
Todd Harrison


Geopolitical crosscurrents swept US stocks lower gradually at first and then with increased urgency.

Some will argue that saber-rattling was the catalyst. The Ukraine President was quoted as saying [subscription required], "There is a real risk of war as it appears as though Russia is ready to invade Ukraine, and is hopefully international efforts can end the aggression." And others will point to the potential for loan defaults in China, and the potential counter-party contagion that could follow.

More likely than not, it is a combination of both.

Adding spice to the mix -- as if the mix needed spice -- is the plethora of potential technical patterns that are at inflection points. In no particular order, they are the following:

S&P (INDEXSP:.INX) 1850: This is where the breakout began and (by definition) where the bulls must hold if there is to be a breakout. If this level fails, there will be a lot of traders sitting in risk without a catalyst.

NASDAQ-100 (INDEXNASDAQ:NDX) 3640: This is the corresponding level for tech. While it's not all-time highs, it is the near-term pivot point.

iShares NASDAQ Biotechnology Index (NASDAQ:IBB) 260: Biotech led the market higher, and lately, it's led the market lower. IBB 260 is the technical toggle that will define the near-term momentum.

KBW Bank Index (INDEXSP:BKX) 71.50 and Dow Jones Transportation Average (INDEXDJX:DJT): The banks and transports never confirmed the breakout, and a rally through these levels was and is necessary to do so.

MAXIS Nikkei 225 Index (NYSEARCA:NKY) 14700 and NKY 14000: Japan is sitting on a near-term trend-line, which is the only technical support between current levels and NKY 14000. And if Japan breaks NKY 14K, it works (through a pure technical lens) a full 16% lower, to NKY 11680.

Shanghai Composite (SHA:000001) 1985: The Shanghai Composite rallied 1% last night, holding its respective level of lore despite all sorts of chatter of an imminent wave of defaults. I recently wrote that this juncture in China reminds me of September 2008 in the US, but that remains to be seen. A break of 1985 on the Shanghai Composite works 10% lower.

Don't anticipate the patterns-- again, this is the tough zone in here-- but see them, no matter which way you choose to play.


Friday, March 14, 2014

Japan (Follow-Up)
Rafael Diamond

Japan is down 5% since my March 7 post on the Buzz & Banter [subscription required], with nearly all the losses in the last three days -- 3% last night alone. The market is very close to triggering my hard 5% stop for any intermediate exposure (15-20% expected return) that experiences an immediate drawdown. This is a core money management rule, one that has kept me out of big trouble when it mattered.

Despite being close to exiting Japan, my firm, Archaea Capital, remains constructive and long other equity markets, looking for signs of capitulation and opportunities to deploy cash. In particular, I am intrigued that emerging markets and even Brazil are actually holding up over the last three days, even as the US has fallen 2%, the EU has fallen 2% to 4%, and Japan has fallen 5%. However, I would exit if these also broke my 5% limit. I continue to watch the precious metals charts, which have not broken out either way, with special attention to the silver chart that I sent out a few days ago on the Buzz & Banter [subscription required].

Back to Japan, yesterday's drop resulted in a 225:0 (one hundred percent) down day in the Nikkei (see the chart below). In twenty-one years, this has only happened four times: April 18, 2005, May 23, 2013 (one day after the top), June 13, 2013 (the bottom), and yesterday. Amazingly, two of these dates were the bookends to the biggest decline in Japan last year. The April 2005 line came three days before the bottom for that year as well.

The gray lines in the chart below expand the same concept, that is, to look at days with more than 220 decliners over the last 20 years.


Click to enlarge

Here is the average return of the 18 signals if held for 120 days.


Click to enlarge

Unfortunately, the distribution of these returns is too wide for comfort.


Click to enlarge

In summary, while there have been some great bottom calls, there were some large initial drawdowns as well.


Click to enlarge

Next, this is the updated intermediate-term chart for the TSE First Section Issues (INDEXTYOTOPIX), still holding despite the big drop yesterday. I think support holds, and it seems like it will be tested rather soon.


Click to enlarge

Finally, this is the updated TOPIX "greed-panic" chart. It blasted through my suggested trendline, and it is now among the top ten highest levels of panic in the last 20 years.


Click to enlarge

The main question for an investor looking at the above chart is: is this the "slow bleed" of 2002-2003, 2010, and 2011 (blue lines)? Or are we within a few days of a major bottom in Japan?

I may soon get pushed out of this ring, but in the meantime, I am watching very closely for signs of a major reversal.

Twitter: @Minyanville

Follow the markets all day every day with a FREE 14 day trial to Buzz & Banter. Over 30 professional traders share their ideas in real-time. Learn more.

< Previous
  • 1
Next >
No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

Buzz on the Street: Market Bulls Watch Ukraine, Hope Putin Will Avoid Escalation
A look back at the happenings on Wall Street this week, as seen by Minyanville's Buzz & Banter.
Minyanville Staff    

These articles were originally posted on the Buzz & Banter where subscribers can follow over 30 professional traders as they share their ideas in real time. Want access to the Buzz plus unlimited market commentary? Click here to learn more about MVPRO.

Here is a small sampling of the 120+ posts seen on the Buzz & Banter this week:

Monday, March 10, 2014


Changing Trends and Divergences for Global Automakers
Debashish Bose

I compared the charts of several global automobile manufacturers, and they paint an interesting picture. I deliberately left Tesla (NASDAQ:TSLA) out of this analysis as it probably has a different set of drivers for its stock performance.

Let's start with the strongest pattern: Daimler (ETR:DAI) (the maker of Mercedes). It has a dream chart for any bull.


Click to enlarge

But looking across at its two country cousins, BMW (ETR:BMW) and Volkswagen (ETR:VOW), and a rather different picture emerges. While they too are close to highs, they seem to be showing the initial signs of distribution.


Click to enlarge


Click to enlarge

Now have a look at two of the biggest mass market automakers, Toyota (NYSE:TM) and Ford (NYSE:F). Note that the rounding top distribution pattern has been a lot more pronounced and in play for almost a year now. Are the 99% hurting more than the 1%?


Click to enlarge


Click to enlarge

Looking at two of the largest emerging markets automakers (though their sales drivers are the US, China, and Europe), Hyundai (KRX:005380) and Tata Motors (NYSE:TTM), I see divergent trends here with Tata Motors being a lot stronger and hitting new highs, while Hyundai is clearly struggling.


Click to enlarge


Click to enlarge

Aside from fundamental factors, part of it could probably be explained greater weakness of the Indian rupee (INR) relative to the South Korean won (KRW) in the past year, translating into a larger export earnings for Tata Motors.

Here is General Motors (NYSE:GM) to round it up. General Motors dipped down to its 200 DMA earlier this year, and it is bouncing back. The jury is still out on whether this is just a correction or the start of a downtrend


Click to enlarge

The auto sector has been a relative out-performer on the back of improving earnings over the past few years following the massive leg down during the financial crisis.

It has also been a good hiding ground for global investors with a risk-averse mindset as they have bet on the high return on capital trends for these companies.

Until last year, the patterns of most global majors seem to be much more in sync, but now that divergences are appearing, changes could be ahead.


Tuesday, March 11, 2014

Fuel Cells Cratering
Michael Comeau

Fuel cell stocks are taking it on the chin.

Check out the charts below. Ballard Power (NASDAQ:BLDP) is now down 11% on the day, Plug Power (NASDAQ:PLUG) is down 15%, and FuelCell Energy (NASDAQ:FCEL) is down 3%.

http://image.minyanville.com/assets/buzzbanter/charts/original/031114/BLDPN_1394557724.JPG
Click to enlarge

http://image.minyanville.com/assets/buzzbanter/charts/original/031114/PLUGn_1394557733.JPG
Click to enlarge

http://image.minyanville.com/assets/buzzbanter/charts/original/031114/FCELn_1394557742.JPG
Click to enlarge

I'm not seeing an obvious catalyst. Perhaps the Citron Research from earlier today [subscription required], which stated that Plug Power's fair value is $0.50, is inspiring some long-needed profit-taking?

The Russell 2000 (INDEXRUSSELL:RUT) has been pretty shaky, trading lower over the past week while the space was skyrocketing. I guess sooner or later, these had to break.

Let's see if the bulls fight back.


Wednesday, March 12, 2014

More on Copper
Michael Sedacca


The nine-day RSI on the Shanghai copper futures June contract hit the lowest reading in history for the contract at 6.2. Please note in the chart below that I am using the continous contract rather than front month (M4) for continuity purposes.

Additionally, there is speculation that China's commodity stockpiler, the State Reserve Bureau (SRB), was absorbing $25 billion or more of copper collateral positions that were getting wiped out last night. The copper collateral positions were held by banks and corporations.

Interestingly, the damage in copper appears to be focused in China rather than in the global futures, certainly implying that this is solely a Chinese problem. Since Monday's close, the global CME future is down 2.78% versus the 4.73% decline in the Shanghai future, though the move in the CME future is still an extremely large move

With assistance from Neil Azous at Rareview Macro.


Click to enlarge



Thursday, March 13, 2014

Levels R' Us!
Todd Harrison


Geopolitical crosscurrents swept US stocks lower gradually at first and then with increased urgency.

Some will argue that saber-rattling was the catalyst. The Ukraine President was quoted as saying [subscription required], "There is a real risk of war as it appears as though Russia is ready to invade Ukraine, and is hopefully international efforts can end the aggression." And others will point to the potential for loan defaults in China, and the potential counter-party contagion that could follow.

More likely than not, it is a combination of both.

Adding spice to the mix -- as if the mix needed spice -- is the plethora of potential technical patterns that are at inflection points. In no particular order, they are the following:

S&P (INDEXSP:.INX) 1850: This is where the breakout began and (by definition) where the bulls must hold if there is to be a breakout. If this level fails, there will be a lot of traders sitting in risk without a catalyst.

NASDAQ-100 (INDEXNASDAQ:NDX) 3640: This is the corresponding level for tech. While it's not all-time highs, it is the near-term pivot point.

iShares NASDAQ Biotechnology Index (NASDAQ:IBB) 260: Biotech led the market higher, and lately, it's led the market lower. IBB 260 is the technical toggle that will define the near-term momentum.

KBW Bank Index (INDEXSP:BKX) 71.50 and Dow Jones Transportation Average (INDEXDJX:DJT): The banks and transports never confirmed the breakout, and a rally through these levels was and is necessary to do so.

MAXIS Nikkei 225 Index (NYSEARCA:NKY) 14700 and NKY 14000: Japan is sitting on a near-term trend-line, which is the only technical support between current levels and NKY 14000. And if Japan breaks NKY 14K, it works (through a pure technical lens) a full 16% lower, to NKY 11680.

Shanghai Composite (SHA:000001) 1985: The Shanghai Composite rallied 1% last night, holding its respective level of lore despite all sorts of chatter of an imminent wave of defaults. I recently wrote that this juncture in China reminds me of September 2008 in the US, but that remains to be seen. A break of 1985 on the Shanghai Composite works 10% lower.

Don't anticipate the patterns-- again, this is the tough zone in here-- but see them, no matter which way you choose to play.


Friday, March 14, 2014

Japan (Follow-Up)
Rafael Diamond

Japan is down 5% since my March 7 post on the Buzz & Banter [subscription required], with nearly all the losses in the last three days -- 3% last night alone. The market is very close to triggering my hard 5% stop for any intermediate exposure (15-20% expected return) that experiences an immediate drawdown. This is a core money management rule, one that has kept me out of big trouble when it mattered.

Despite being close to exiting Japan, my firm, Archaea Capital, remains constructive and long other equity markets, looking for signs of capitulation and opportunities to deploy cash. In particular, I am intrigued that emerging markets and even Brazil are actually holding up over the last three days, even as the US has fallen 2%, the EU has fallen 2% to 4%, and Japan has fallen 5%. However, I would exit if these also broke my 5% limit. I continue to watch the precious metals charts, which have not broken out either way, with special attention to the silver chart that I sent out a few days ago on the Buzz & Banter [subscription required].

Back to Japan, yesterday's drop resulted in a 225:0 (one hundred percent) down day in the Nikkei (see the chart below). In twenty-one years, this has only happened four times: April 18, 2005, May 23, 2013 (one day after the top), June 13, 2013 (the bottom), and yesterday. Amazingly, two of these dates were the bookends to the biggest decline in Japan last year. The April 2005 line came three days before the bottom for that year as well.

The gray lines in the chart below expand the same concept, that is, to look at days with more than 220 decliners over the last 20 years.


Click to enlarge

Here is the average return of the 18 signals if held for 120 days.


Click to enlarge

Unfortunately, the distribution of these returns is too wide for comfort.


Click to enlarge

In summary, while there have been some great bottom calls, there were some large initial drawdowns as well.


Click to enlarge

Next, this is the updated intermediate-term chart for the TSE First Section Issues (INDEXTYOTOPIX), still holding despite the big drop yesterday. I think support holds, and it seems like it will be tested rather soon.


Click to enlarge

Finally, this is the updated TOPIX "greed-panic" chart. It blasted through my suggested trendline, and it is now among the top ten highest levels of panic in the last 20 years.


Click to enlarge

The main question for an investor looking at the above chart is: is this the "slow bleed" of 2002-2003, 2010, and 2011 (blue lines)? Or are we within a few days of a major bottom in Japan?

I may soon get pushed out of this ring, but in the meantime, I am watching very closely for signs of a major reversal.

Twitter: @Minyanville

Follow the markets all day every day with a FREE 14 day trial to Buzz & Banter. Over 30 professional traders share their ideas in real-time. Learn more.

< Previous
  • 1
Next >
No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

Buzz on the Street: Market Bulls Watch Ukraine, Hope Putin Will Avoid Escalation
A look back at the happenings on Wall Street this week, as seen by Minyanville's Buzz & Banter.
Minyanville Staff    

These articles were originally posted on the Buzz & Banter where subscribers can follow over 30 professional traders as they share their ideas in real time. Want access to the Buzz plus unlimited market commentary? Click here to learn more about MVPRO.

Here is a small sampling of the 120+ posts seen on the Buzz & Banter this week:

Monday, March 10, 2014


Changing Trends and Divergences for Global Automakers
Debashish Bose

I compared the charts of several global automobile manufacturers, and they paint an interesting picture. I deliberately left Tesla (NASDAQ:TSLA) out of this analysis as it probably has a different set of drivers for its stock performance.

Let's start with the strongest pattern: Daimler (ETR:DAI) (the maker of Mercedes). It has a dream chart for any bull.


Click to enlarge

But looking across at its two country cousins, BMW (ETR:BMW) and Volkswagen (ETR:VOW), and a rather different picture emerges. While they too are close to highs, they seem to be showing the initial signs of distribution.


Click to enlarge


Click to enlarge

Now have a look at two of the biggest mass market automakers, Toyota (NYSE:TM) and Ford (NYSE:F). Note that the rounding top distribution pattern has been a lot more pronounced and in play for almost a year now. Are the 99% hurting more than the 1%?


Click to enlarge


Click to enlarge

Looking at two of the largest emerging markets automakers (though their sales drivers are the US, China, and Europe), Hyundai (KRX:005380) and Tata Motors (NYSE:TTM), I see divergent trends here with Tata Motors being a lot stronger and hitting new highs, while Hyundai is clearly struggling.


Click to enlarge


Click to enlarge

Aside from fundamental factors, part of it could probably be explained greater weakness of the Indian rupee (INR) relative to the South Korean won (KRW) in the past year, translating into a larger export earnings for Tata Motors.

Here is General Motors (NYSE:GM) to round it up. General Motors dipped down to its 200 DMA earlier this year, and it is bouncing back. The jury is still out on whether this is just a correction or the start of a downtrend


Click to enlarge

The auto sector has been a relative out-performer on the back of improving earnings over the past few years following the massive leg down during the financial crisis.

It has also been a good hiding ground for global investors with a risk-averse mindset as they have bet on the high return on capital trends for these companies.

Until last year, the patterns of most global majors seem to be much more in sync, but now that divergences are appearing, changes could be ahead.


Tuesday, March 11, 2014

Fuel Cells Cratering
Michael Comeau

Fuel cell stocks are taking it on the chin.

Check out the charts below. Ballard Power (NASDAQ:BLDP) is now down 11% on the day, Plug Power (NASDAQ:PLUG) is down 15%, and FuelCell Energy (NASDAQ:FCEL) is down 3%.

http://image.minyanville.com/assets/buzzbanter/charts/original/031114/BLDPN_1394557724.JPG
Click to enlarge

http://image.minyanville.com/assets/buzzbanter/charts/original/031114/PLUGn_1394557733.JPG
Click to enlarge

http://image.minyanville.com/assets/buzzbanter/charts/original/031114/FCELn_1394557742.JPG
Click to enlarge

I'm not seeing an obvious catalyst. Perhaps the Citron Research from earlier today [subscription required], which stated that Plug Power's fair value is $0.50, is inspiring some long-needed profit-taking?

The Russell 2000 (INDEXRUSSELL:RUT) has been pretty shaky, trading lower over the past week while the space was skyrocketing. I guess sooner or later, these had to break.

Let's see if the bulls fight back.


Wednesday, March 12, 2014

More on Copper
Michael Sedacca


The nine-day RSI on the Shanghai copper futures June contract hit the lowest reading in history for the contract at 6.2. Please note in the chart below that I am using the continous contract rather than front month (M4) for continuity purposes.

Additionally, there is speculation that China's commodity stockpiler, the State Reserve Bureau (SRB), was absorbing $25 billion or more of copper collateral positions that were getting wiped out last night. The copper collateral positions were held by banks and corporations.

Interestingly, the damage in copper appears to be focused in China rather than in the global futures, certainly implying that this is solely a Chinese problem. Since Monday's close, the global CME future is down 2.78% versus the 4.73% decline in the Shanghai future, though the move in the CME future is still an extremely large move

With assistance from Neil Azous at Rareview Macro.


Click to enlarge



Thursday, March 13, 2014

Levels R' Us!
Todd Harrison


Geopolitical crosscurrents swept US stocks lower gradually at first and then with increased urgency.

Some will argue that saber-rattling was the catalyst. The Ukraine President was quoted as saying [subscription required], "There is a real risk of war as it appears as though Russia is ready to invade Ukraine, and is hopefully international efforts can end the aggression." And others will point to the potential for loan defaults in China, and the potential counter-party contagion that could follow.

More likely than not, it is a combination of both.

Adding spice to the mix -- as if the mix needed spice -- is the plethora of potential technical patterns that are at inflection points. In no particular order, they are the following:

S&P (INDEXSP:.INX) 1850: This is where the breakout began and (by definition) where the bulls must hold if there is to be a breakout. If this level fails, there will be a lot of traders sitting in risk without a catalyst.

NASDAQ-100 (INDEXNASDAQ:NDX) 3640: This is the corresponding level for tech. While it's not all-time highs, it is the near-term pivot point.

iShares NASDAQ Biotechnology Index (NASDAQ:IBB) 260: Biotech led the market higher, and lately, it's led the market lower. IBB 260 is the technical toggle that will define the near-term momentum.

KBW Bank Index (INDEXSP:BKX) 71.50 and Dow Jones Transportation Average (INDEXDJX:DJT): The banks and transports never confirmed the breakout, and a rally through these levels was and is necessary to do so.

MAXIS Nikkei 225 Index (NYSEARCA:NKY) 14700 and NKY 14000: Japan is sitting on a near-term trend-line, which is the only technical support between current levels and NKY 14000. And if Japan breaks NKY 14K, it works (through a pure technical lens) a full 16% lower, to NKY 11680.

Shanghai Composite (SHA:000001) 1985: The Shanghai Composite rallied 1% last night, holding its respective level of lore despite all sorts of chatter of an imminent wave of defaults. I recently wrote that this juncture in China reminds me of September 2008 in the US, but that remains to be seen. A break of 1985 on the Shanghai Composite works 10% lower.

Don't anticipate the patterns-- again, this is the tough zone in here-- but see them, no matter which way you choose to play.


Friday, March 14, 2014

Japan (Follow-Up)
Rafael Diamond

Japan is down 5% since my March 7 post on the Buzz & Banter [subscription required], with nearly all the losses in the last three days -- 3% last night alone. The market is very close to triggering my hard 5% stop for any intermediate exposure (15-20% expected return) that experiences an immediate drawdown. This is a core money management rule, one that has kept me out of big trouble when it mattered.

Despite being close to exiting Japan, my firm, Archaea Capital, remains constructive and long other equity markets, looking for signs of capitulation and opportunities to deploy cash. In particular, I am intrigued that emerging markets and even Brazil are actually holding up over the last three days, even as the US has fallen 2%, the EU has fallen 2% to 4%, and Japan has fallen 5%. However, I would exit if these also broke my 5% limit. I continue to watch the precious metals charts, which have not broken out either way, with special attention to the silver chart that I sent out a few days ago on the Buzz & Banter [subscription required].

Back to Japan, yesterday's drop resulted in a 225:0 (one hundred percent) down day in the Nikkei (see the chart below). In twenty-one years, this has only happened four times: April 18, 2005, May 23, 2013 (one day after the top), June 13, 2013 (the bottom), and yesterday. Amazingly, two of these dates were the bookends to the biggest decline in Japan last year. The April 2005 line came three days before the bottom for that year as well.

The gray lines in the chart below expand the same concept, that is, to look at days with more than 220 decliners over the last 20 years.


Click to enlarge

Here is the average return of the 18 signals if held for 120 days.


Click to enlarge

Unfortunately, the distribution of these returns is too wide for comfort.


Click to enlarge

In summary, while there have been some great bottom calls, there were some large initial drawdowns as well.


Click to enlarge

Next, this is the updated intermediate-term chart for the TSE First Section Issues (INDEXTYOTOPIX), still holding despite the big drop yesterday. I think support holds, and it seems like it will be tested rather soon.


Click to enlarge

Finally, this is the updated TOPIX "greed-panic" chart. It blasted through my suggested trendline, and it is now among the top ten highest levels of panic in the last 20 years.


Click to enlarge

The main question for an investor looking at the above chart is: is this the "slow bleed" of 2002-2003, 2010, and 2011 (blue lines)? Or are we within a few days of a major bottom in Japan?

I may soon get pushed out of this ring, but in the meantime, I am watching very closely for signs of a major reversal.

Twitter: @Minyanville

Follow the markets all day every day with a FREE 14 day trial to Buzz & Banter. Over 30 professional traders share their ideas in real-time. Learn more.

< Previous
  • 1
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No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

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