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Rinse, wash, repeat
Seattle Technical May 29, 2012

Ed Carlson

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the highly correlated cross peaked on Tuesday and saw new lows last week.Internal Indicators VIX Last Friday’s short-term signal worked well in calling a bottom in equities. BWI is not confirming.5 billion for the same period in 2011. The bounce in the oscillator since then has been less-thanconvincing that a tradable bottom has been seen. Euro-Yen cross. We’ll be watching for divergences in our sentiment indicators (with any new lows in the averages) this week as a bottom signal. compared to just $6. i. AAII Sentiment: Bullish sentiment rebounded as bearish sentiment pulled back from unusually high levels in the latest AAII Sentiment Survey.9 percentage points to 30.e. Confirmed buymode (sell equities). unlike equities. Target 26 McClellan Oscillator We also mentioned a buy signal for this indicator last week. Complex structure below Page 1 . 2012 redemptions amounting to $46 billion. rose 6. and 52 weeks of outflows in the past 56 weeks. Bullish sentiment. SeattleTechnicalAdvisors. expectations that stock prices will rise over the next six months. Sentiment: Another $3.5%.5 billion was pulled out of domestic mutual funds per ICI bringing the total to 13 consecutive weeks of outflows.

Descending triangles typically (but not always) resolve themselves to the downside. Confirmed Page 2 . SeattleTechnicalAdvisors. That is what we would expect with any further downside in the broad market. The ratio between small caps (Russell 2000) and the broad market (SPX) makes for an interesting picture with the descending triangle pattern. Technology Same here Small Caps: bearish head-and-shoulders pattern in the Russell 2000 (RUT) targets a minimum move to 720. BWI failed to confirm last week’s “advance”.Market Leaders Energy Oil and Gas (XOI) and Exploration (OSX) both participated in last week’s equity ‘advance’ but neither was confirmed by BWI. Ratio Charts: Pretty much what you would expect last week with defensives taking a breather after weeks of outperformance. Financials: Ditto for Bankers (BKX) and Brokers (XBD).

Cycles & Confluence Zones We wouldn’t plan on ‘riding out’ (staying short) the tradable advance we expect to get started next week. 1. 13-week cycle low is due this week SeattleTechnicalAdvisors. full moon on Monday. 1.Lindsay time intervals.220 Fibonacci resistance zones. If the October lows are breached.285. 1. Friday’s expected fade. the market has certainly dropped enough to qualify for that title and a June low is ‘right in the pocket’ of our March–September forecast. Fibonacci support zones. We are bothered that we have a very clear middle section which points to a low on 11/12/12. 6/4/12. 1. A not-so-obvious middle section does point to June 4. We can count two different basic declines from last year’s highs in May and July which both work for a final low on June 4. looks to be a low (in the Dow) but a higher high was seen intraday in both the SPX and RUT. With our view that the post October 2011 rally is an advance from a Sideways Movement. no final low until this autumn. 6/4/12 Last week’s fade date on 5/23/12 turned out to be a low which was printed intraday.310.310.340 Fade Dates: None identified this week. it’s quite possible that this low is the 12year low we’ve been writing about for the last Page 3 . We were expecting the final low later in the year – and that may still be the case – but with the bounce expected to be tradable and our uncertainty about the longer term – we believe the prudent thing to do is follow the signals we get from the Confirmation model and stay on our toes. however. at first glance. 1.

US Equities Bear Market After some relief last week. Mode: sell Signal: sell Position: short SeattleTechnicalAdvisors. We’ll make that our target for our June 4 bottom. Lindsay’s Three Peaks and a Domed House formation tells us to expect a move back to the October 2011 lows but that assumes no new high this year. Page 4 . Long term. then that will make for a record-setting short bear market (unless we see a crash). 14-day RSI was unable to even get above its own 20-dma last week and 3-day RSI peaked at 60 (sub-80). Weak! A 13-day cycle top was due last Thursday. Now for the grinder! If June 4 is the low for the year. repeat. Coppock Curves: the weekly and monthly are declining. We look for a positive divergence at a bottom.285. A Fib support zone and 200-dma are near 1. BWI is in a confirmed sell mode and is declining (not confirming) last week’s advance. Daily turned up last week. we expect one final week of decline this week … rinse..

50 Coppock Curves: The daily. A breach here targets the next zone at 30.50. Fib support zones: 32. and monthly are all in decline: very bearish.50. FXI closed in the Fib support zone at 32. FXI seems to work differently than other asset classes in this regard.50 on Friday. It must be in a hurry to get to our price target of 30. 太差了 SeattleTechnicalAdvisors. we would normally believe FXI to be in a bear market.FTSE/Xinhua25 With 14-day RSI trading below 30. We believe FXI is telling us to expect a tradable rally. 41.00-30. 30. FXI looked more like the Euro-Yen cross than US equities last week as both spent the better part of the week declining. A 21-day cycle is due June 4 and a 21-week cycle hits the week-ended June 1. Page 5 .50. Fib resistance zones: 38. These extreme prints by RSI (above 70 or below 30) tend to forecast a change in trend.

500 Fib resistance zones: 8.450 Coppock Curves: The daily is trying to turn upward but the weekly and monthly are both in decline. the Fib support zone surrounding 8. Fib support zones: 8. 8. 9.600.Nikkei225 Bear market NKX spent the week bouncing along the bottom.100.550.and 14-day RSI.450-8.550. 非常に悪い SeattleTechnicalAdvisors.100. 9. We’ll make that our price target once the rally gets started in June. 233-dma and Fib resistance zone both at Page 6 . BWI has started to decline and we see positive divergences in both 3.

let’s look for a break of the 13-dma. Fib support zones. TNX Bear market Last week we wrote “We look for a bounce now and a re-test of this level at monthend. Those both work well with our expected bottom in equities about then.US Treasuries. TNX has attained our target of 17.” We saw the bounce last week and now for the test… but wait! Is that a triangle we see forming? Being a continuation pattern. SeattleTechnicalAdvisors. We believe this level will hold for the foreseeable future – at least until the summer rally in equities is finished. But before getting long rates/short bonds. the triangle implies further Page 7 . 17. 14 Coppock Curves: The daily has turned up but both the weekly and monthly are in decline. A 21-week cycle inflection point is due the week-ended 6/1/12 and a 13-day cycle is due 5/31/12. We believe this triangle will be like the one we saw in the Nikkei last December and it will function as a reversal pattern (this time)… but be careful.

Very Bullish. the DecJune period has been the strongest six months of the year.50 Longer term price target of 90. USD: Over the last 25 years. 85. weekly. 21-week cycle due the week-ended 6/1/12 21-day cycle due 6/1/12 Coppock Curves: Page 8 . and monthly all pointed up. Fib resistance zones: 84.50.US Dollar Bull Market DXY gave us the breakout we were expecting last week but BWI has turned down indicating that the month-long advance is long-in-the-tooth (nearing its end). Still in a confirmed buy-mode. Election years are usually USD bullish SeattleTechnicalAdvisors. however. so we’ll be looking for an opportunity to get long again but we don’t expect it for a few weeks.

weekly. 1. Fib support zones.350 Coppock Curves: All three curves.315. Remember. Uber bearish. daily. BWI has turned down with last week’s decline so we know we’re close to a bottom here. 21-day cycle due today and 13-day cycle due 6/4/12 21-week cycle low due next week (6/8/12) With no resistance until 1.315 this could be a big rally. the biggest rallies are in bear markets! Don’t get pulled into the meat grinder. SeattleTechnicalAdvisors. Page 9 . and monthly are declining. 1.245 Fib resistance zones. 1.Euro Bear Market The Euro attained our downside price target last week and went on to print lower lows.265.

50 Coppock Curves.for all intents and purposes . 127. it was .50 and only a week left in our game plan.50 after the previous Thursday’s break-out.Japanese Yen The Yen got sucked back into the Fib resistance zone at 125. Daily is declining and has not confirmed the new high in price. SeattleTechnicalAdvisors. Fib resistance zones.50. we wouldn’t get long if not already. negative divergence. 122. 34-day cycle is due 6/18/12 and looks important.00. Long positions could be held with tight stops. Mark it on your calendar.50. Weekly is advancing but the monthly continues to decline. the inversely correlated Yen could have a little more life left in it – particularly with that red triangle we see implying a continuation of the advance. A close below the 21-dma will be our first clue that the sushi has gotten Page 10 . With a Fib resistance zone at 127.50 Fib support zone at 124. With one more week of downside expected for equities. 125. A break-out from the wedge is our next clue.a sideways week. 120. Although it ended the week lower than where it began.

85. As part of the ‘risk-trade’ it makes sense to expect a rally in crude together with equities and TNX. 34-day cycle hits on 5/30/12 21-week cycle is due the week-ended 7/6/12 Long-term trendline at 80 Fib support zones.50. A falling BWI is another reason to expect a rally in the near future. we believe crude either has more downside this week or needs to spend some time building a bottom. 114 Coppock Curves: Daily has turned up but weekly and monthly are declining. But before any rally. 82 Fib resistance zones: 93. 99.Crude Oil Bear market Crude printed a new low on Wednesday followed by inside-days on Thursday/ Page 11 . SeattleTechnicalAdvisors. Last Friday appears to have been a fade-date.and 14-day RSI. 84. 88. 90. 96. 108. We can see positive divergences in both 3.

but the decline has been arrested. 1.mode (sell bounces) Fade-date this Thursday. any advance in price should be short-lived.660 Confirmed sell.815 SeattleTechnicalAdvisors. We look for the ‘advance’ to sustain itself until Page 12 . Fib support zones: 1. a 21-week cycle targets a turn during the week-ended June 1. Rally target of 1. Also.535. BWI finally started to drop with last week’s bounce upward (failure to confirm).460 Fib resistance zones: 1.625 – 1.Gold “Lindsay intervals imply a top to this “advance” May 31-June 2 (See 4/19/12 Special Report).” It hasn’t been much of an “advance” so far. 21-day cycle due 6/1/12 21-week cycle low due this week 55-day cycle due 7/9/12 Coppock Curves: The daily is up but with both weekly and monthly in descent.