EURO STROKES A REVERSAL CANDLE BOND YIELDS MOVE HIGHER $WTIC TESTS THE 200 DMA UNG BREAKS THE UP TREND -- CAT RISES WHILE THE MARKET FALLS -- THE SCTR ON CAT HITS A SWEET SPOT A QUICK VIEW OF MAJOR MINING COMPANIES

EURO STROKES A REVERSAL CANDLE ... The Euro has a slow negative slope to it as shown in Chart 1. We can also see the recent trend line break has been cancelled by the move today. The Euro now resides above the trend line, but below the down sloping 50 DMA. We can see the UUP has been above its trend line for a while and this drop today took the $USD back to the 50 DMA but still well above the long down sloping black trend line. With the US dollar settling back today, the materials and energy stocks were some of the best performers on a big up day. I've closed out this market message with a positive note about the US markets today.

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Chart 1

BOND YIELDS MOVE HIGHER ... The $TYX shown in Chart 2 has had a nice bounce off horizontal support. After breaking below the 200 DMA for 3 days, this made a nice move higher which means the prices are falling. The target would be 37.50 to 38.25 for now. As John mentioned yesterday this probably confirms the start of a meaningful rally in equities. The NFP report in the morning could change everything but it looks like the buyers have been showing up for the last two days in equities rather than bonds.

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Chart 2

$WTIC TESTS THE 200 DMA ... The sideways range of Oil for the past 10 days is important. Chart 3 shows the $WTIC holding between the 50 DMA as support and the 200 DMA as resistance. This morning the oil market started out strong, well above the 200 DMA, but at the time of writing has lost almost all the entire move and now resides below the 200. The chart will show the candle after the close. Should the 200 DMA get broken, first target would be $100.75. There is positive divergence on the MACD but if we look left, we can see the same pattern in December. While Arthur Market Message January 31, 2014 and I both expect the trend to continue down, traders should remain very flexible.

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Chart 3

UNG ($NATGAS) BREAKS THE UPTREND... $NATGAS has been an absolute rocket this year. I mentioned it in the Thursday market message last week, suggesting the top was near. However, it looks like the top is in on Chart 4. This is a 60 minute chart of the Natural Gas ETF. It is also confirmed on the high volume HNU.TO.

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Chart 4

CAT RISES WHILE THE MARKET FALLS... Caterpillar has been surging higher as shown on Chart 5 and is up almost 10% after bouncing sharply off the 200 DMA on earnings. I particularly like this chart because the SCTR has risen above my blue line of 75 . A stop could go in at 92 to ensure the stock holds its uptrend.

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Chart 5

THE SCTR ON CAT HITS A SWEET SPOT ... Chart 6 Shows CAT on a weekly chart. Look how nice the pattern is as this rises from a year long base. Higher highs and higher lows are just starting to accumulate above the resistance line. With Caterpillar's large following, I would expect this will light up large institutional scans and screens.

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Chart 6

Chart 7 shows another Dow component that after a long base, started to behave better than 75 % of the stocks last year. Once Boeing (BA)was able to break above resistance, the market quickly adopted an accumulation strategy in the stock. It was a tremendous ride. The SCTR's are an excellent scan tool, which I will present at Chartcon 2014 for those interested.

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Chart 7

A QUICK VIEW OF MAJOR MINING COMPANIES... Chart 8 is a quick view of the major mining companies. The interesting chink in the armour of the CAT story is that most of the miners are still sitting below the 40 WMA. Either CAT pulls back, or these companies start to rise. Based on the fact that Industrials were a leading sector last year, the natural rotation of markets would have Mining (Materials more broadly) starting to accelerate now.

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Chart 8

US MARKETS HAVE THEIR BEST DAY THIS YEAR... To wrap up on a very positive note, the US markets have their best day so far in 2014. We can see on the SPY in Chart 1 that after a corrective phase we put in a strong bounce today on substantially lower volume. This is cautionary, as we usually like a strong volume day to accompany the big move, especially off a big low.

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Chart 9

This does look similar to the January 2010 market correction. After a great year, we churned sideways for a few weeks, then fell down to the Feb 7 low. The bulls came back in day by day. Feels like the same setup to me. Would you agree?

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Chart 10

For your information, on the Canadian Technician blog, I wrote a long, chart based article this week on the global economy from a commodity demand point of view. It is much too long as a market message, but you may enjoy the article. link

Lastly, don't forget to register for SCU 101 and SCU 102 in Atlanta. It is only a month away.
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