SOME NEW AND CONTINUING THEMES FOR 2015 -- SHORT-TERM T-YIELDS RISE AND HALF NORMALIZE -- EURO MOVES CLOSER TO PARITY -- SMALL-CAPS LEAD THE MARKET -- XLF AND IAI TARGET 2007 HIGH -- XLE CONFIRMS LARGE REVERSAL PATTERN
SOME NEW AND CONTINUING THEMES FOR 2015... Today's Webinar will look at long-term charts to extrapolate some themes to consider in 2015. This written commentary shows most of the Webinar charts with some brief notes. Tune into the Webinar for full details. Every so often we get a long-term theme that lifts all boats in one industry group or sector. For example, the Nasdaq surged from 1995 to 1999, housing stocks advanced from 2000 to 2005, gold went from $250 in 2001 to $1900 in 2011, and the Biotech SPDR (XBI) quadrupled from 2009 to 2014. Today I will focus on some themes to watch in 2015. I am not trying to make bold predictions here. Instead, I am trying to extrapolate on some trends that could extend. Trends have energy and tend to extend longer, and further, than most expect. It is usually better to bet on a trend extension than a trend reversal. There will be several trend extensions during an extended trend, but only one reversal. Click here for video.
SHORT-TERM TREASURY YIELDS RISE AND HALF NORMALIZE... Chart 1 shows the 2-year Treasury Yield ($UST2Y) breaking out to its highest level of the year with a surge this month. A move to just 1.5% would return this short-term rate to half of its normal level, which I assume could be 3%.
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Chart 1
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Chart 2
EURO MOVES CLOSER TO PARITY... A rise in short-term yields would benefit the Dollar. Chart 3 shows the Euro Index ($XEU) with two bearish patterns at work. First, there is a falling channel with lower lows and lower highs since 2008. Second, there is a bearish descending triangle and a break at 120 would project a move below 100. This would be bullish for the Dollar.
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Chart 3
SMALL-CAPS LEAD THE MARKET... Third quarter GDP was revised to a whopping 5% growth rate and the 10-month average for non-farm payroll growth is +244,000. These economic trends could favor domestic stocks in 2014. In addition, a strong Dollar may hinder large-cap multinationals. Hence, the S&P Small-Cap 600 may just outperform in 2015. Chart 4 shows the index poised to break out of a 12-month consolidation. A bear market does not start until a close below 600 (12-month low).
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Chart 4
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Chart 5
XLF AND IAI TARGET 2007 HIGH... Chart 6 shows the Finance SPDR (XLF) in a slow steady uptrend since October 2012. The blue lines mark a Raff Regression Channel and the upper line extends to the 2007 later in 2015. Take these projections with a pinch of salt. I am mostly relying on the overall trend to continue, short-term rates to rise and the economy to continue growing. Chart 7 shows the Broker-Dealer iShares (IAI) breaking out with a big move this month and chart 8 shows the Regional Bank SPDR (KRE) trying to join the party.
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Chart 6
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Chart 7
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Chart 8
XLE CONFIRMS LARGE REVERSAL PATTERN... Chart 9 shows the Energy SPDR (XLE) with a large head-and-shoulders reversal pattern, a neckline support break and a throwback to the support break, which turns resistance. The support break is clearly bearish and this throwback could fail at the support break.
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Chart 9
Chart 10 shows Exxon Mobil (XOM) with a large head-and-shoulders reversal in the works and key support in the 86-88 area. Chart 11 shows Chevron (CVX) hitting the 62% retracement and nearing broken support. Chart 12 shows ConocoPhillips (COP) with a big head-and-shoulders pattern over the last 16 months. Chart 13 shows Occidental Petroleum (OXY) bouncing back to resistance in the 82.5 area.
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Chart 10
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Chart 11
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Chart 12
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Chart 13
2015 TARGET FOR GOLD... Chart 14 shows Spot Gold ($GOLD) with its second descending triangle I the last three years. Gold is testing support right now and a break would target a move to the 950-1000 area. Resistance is set at 1260 and a breakout here would negate this target.
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Chart 14
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Chart 15
CYBER SECURITY CONTINUES TO WORK... There is a relatively new ETF devoted to internet security: the PureFund ISE Cyber Security ETF (HACK). I first featured this group in a market message on September 9th and these stocks continue to show relative strength. Chart 15 shows HACK with about two months of trading history. We cannot do much with this chart except to note the higher highs in November and December. Also notice that HACK diverged from SPY from August to October and showed relative strength. Note that I am covering some of the top individual stocks in the Webinar.
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Chart 16
DIVIDING AND CONQUERING AN ETF... So how can we follow an ETF with limited price history? Basically, we have to analyze the individual components and consider their weightings. This may seem like a lot of work, but the tools at StockCharts make it easy to import a customized list. As with most ETFs, the components for HACK are weighted and the top ten stocks account for over 50%. This means Chartists should watch these stocks on a regular basis to get a better idea of what is happening with the ETF. First, note that you can download the components for HACK at the Pure Funds website. Second, note that I worked with the spreadsheet to rank the components by weighting and put that weighting into the security name. Column A is for the symbol and Column B is for the name. Here are the steps and there is a live demo in the Webinar.
1. Download the holdings file from the ETF website.
2. Create and Save a CSV file (comma separated values)
3. Create a SharpChart (any SharpChart)
4. Click "Edit List" at top of SharpChart
5. Click "Create New List" at top of ChartList
6. Choose Name (stocks-hack)
7. Go to "Add Symbols" dialog and click "Choose File" button.
8. Find file and click "open"
9. Click "Upload"
10. Click "OK"
Chart 17
THANKS FOR READING AND ........
Chart 18
