Better Trader

S&P500 Trend & Breadth Analysis

By Ashraf Laidi

93% of shares in the S&P500 index are trading above their 200-day moving averages a level not seen since May 2011. The indicator (200-DMA participation) sheds light on any unfolding divergence between the price of the index and the number of individual components. That is especially the case if the breadth line stands near or below 50% during a continued increase in the underlying market.

17 quarters vs 19 quarters

The continuity of the recent rally is becoming hard to ignore.  The S&P500 has not had a 10% peak-to-trough decline in 49 weeks. Prior rallies without a 10% decline were seen in Mar 2009- Apr 2010 (59 weeks) and June 2006 to July 2007 (56 weeks).

Another fact worth noting is that the rally since the March 2009 lows has lasted for 17 quarters, nearly matching the 18 quarters from autumn 2002 to autumn 2007. The rally

Exceeding the Trend

The S&P500’s ascent can also be measured by the extent to which it has surpassed from long term measures of trend. Currently trading at 1633, the S&P500 is 11% above its 200-DMA, the farthest away the 15% deviation attained in February 2011

On a weekly basis, the S&P500 is 22.5% above 200-WMA, the farthest it had been since 2000, when the index rose as high as 31% above its 200-DMA at the heights of March 2000. Even during the record levels of October 2007, the S&P500 went as far as 19% above its 200 WMA.

On a monthly basis, S&P500 stands 24% and 27% above its 100 and 200-month average respectively, the farthest away from its long term average during the post financial crisis. The last time we saw bigger disparities was in 2007.

Health & Financials

Year-to-date, the best 4 sectors have been health care (+21.3%), consumer discretionary (19.3%), consumer staples (+18.0%) and financials (+17.5%).  Materials and technology have lagged at 6.6% and 7.9% respectively.

Over the last 4 weeks, the sectoral returns have been led by financials, technology, consumer discretionary and materials, with utilities being the only losing sector.

Entering its 7th monthly consecutive rally, the S&P500 attains its longest monthly gain since 2006-2007. As lofty as the current levels appear, long term momentum indicators continue to point to neutral-to-positive dynamics, last seen in 2004, which was the 2nd third of the 2002-2007 bull market. As support levels rise to 1580, key upside target emerges at 1687 as the next viable barrier.

Ashraf Laidi is Chief Global Strategist at Leading Spread Betting Company - City Index

Read this New Special Report before Gold and Silver Drop Further

As I write this email, gold is down more than 3% for the morning of Friday, May 10.

Major pullbacks like Friday's are often followed by big bounces, but as gold and silver threaten to breach the recent April lows, many investors have an important question in mind:

Are we in the early stages of a gold and silver bear market, or is downward pressure on the metals setting up another buying opportunity for the bulls?

On April 23, Robert Prechter, a famed market technician known for calling the roaring bull market of the 1980s, the '87 crash and the March 2009 stock market low, published an urgent new issue of his Elliott Wave Theorist.

This issue is so powerful (and so urgent) that EWI has pulled out a Special Two-Page Report for you to read -- for FREE.

Every issue of the Theorist provides a unique look at tomorrow's news today. This issue meets that high standard and more. It's one of the most powerful and revealing issues of the Theorist subscribers will ever read.

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Please follow this link to get instant access to Prechter's urgent Special Two-Page Report, and get ahead of what's coming next in the Gold and Silver markets

An Urgent New Resource from Market Technician Bob Prechter

On Tuesday afternoon (April 23), Robert Prechter, a famed market technician known for calling the roaring bull market of the '80s, the 1987 crash and the March 2009 stock market low, published an urgent new issue of his Elliott Wave Theorist.

This issue is so powerful -- and so urgent -- that EWI has unlocked the first two pages for you to read with no obligation to buy.

Every issue of the Theorist provides you with a unique look at tomorrow's news today. This issue meets that high standard and more. It's one of the most powerful and revealing issues of the Theorist subscribers will ever read. Now, Prechter is not always right. Unfortunately, no market analyst is. But there's one thing his readers know for certain: When Prechter revs up his urgency, he sees something big on the horizon.

Due to the timely nature of this issue, EWI cannot make the first two pages available indefinitely, so they've set a date of May 8 to end this special promotion -- at which time the first two pages will no longer be available for free.

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FTSE-100′s Internal Strength

By Ashraf Laidi

The FTSE-100 is set to post its 11-monthly gain, beating the previous record of 10-straight monthly advances set in 1996-1997.

79% of shares in the FTSE-100 are trading above their 200-day moving average. The indicator (200-DMA participation) gives an idea on the internal strength of the underlying index, by highlighting the degree of participation of individual shares in the current rally. Analysing the relationship between the underlying index and the 200-DMA participation sheds light on any unfolding divergence between the price of the index and the number of individual components. That is especially the case if the breadth line stands near or below 50% during a continued increase in the underlying market.

Working in favour of the FTSE-100 is the lack of any divergence between the FTSE-100 and its 200-DMA participation. The latter fell to a 6-month low of 74% in early April at the same time as the index hit a 5-month low. Also note the participation line continues to respect its trendline support since August 2011. Only a close below 75% would be considered a break of the 18-month trendline support.

One reason the FTSE-100’s 200-DMA participation of 79% stands below the 86% seen in the Dow-30 and the S&P500 is the damage sustained to the eight mining shares of the FTSE following the broad damage in gold and iron ore. A renewed decline in commodities would have to be offset by a continued rally in banks, brokerages and asset managers.

Focusing on the FTSE-100, hitting 11-monthly gains is not necessarily a reflection of overbought market momentum. Both the weekly and monthly momentum stochastics measures indicate a path of prolonged stability. The trendline resistance, extending from the 1999 record high, remains untested. 6,590 marks the level at which the 14-year year trendline resistance is to be tested. The immediate resistance stands at 6,530, followed by 6,590. The narrow escape from a triple dip recession coupled with the persistent gains in employment may be sufficient to trigger fresh momentum to the current rally. The threat from the periodic May sell-off, will may well be seen as a buying opportunity as long as the 6,240 support survives a weekly close.

 

Ashraf Laidi is Chief Global Strategist at Leading Spread Betting Company - City Index

How Market Losers Think, and How to Stop Doing It

To become an independent investor, you have to crawl before you walk and walk before you run.

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If you mistrust the conventional notions that markets are always efficient, investors are always rational and prices always reflect value, give Prechter 23 minutes of your time.

In those 23 minutes, you will discover …

    How events like 9/11 and the Enron scandal have a relationship to markets that is shockingly different than what you think.
    The surprising link between interest rates and stocks.
    Inflation and deflation's impact on hard money.
    Central bankers' supposed power to turn trends.
    What new data says about the long-term viability of investment models based on earnings and value.
    And more, including the secret force that drives the decisions of futures traders, investment advisors, money managers, hedge fund managers and economists.

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Sentiment Drives Stock Prices

By Thierry Laduguie

If you are on Twitter you will have noticed an increase in the number of posts about gold. Gold crashed earlier this week and that’s why everyone is talking about it. It appears that many traders were on the wrong side. The yellow metal has been in a bull market for years, and as we know, bull markets always come to an end. The question is: is this the end of the bull market in gold? It could be but I won’t bet on it, I am not an expert on gold. What I can say is that commodity prices, like stocks prices can suddenly drop at a time when there is no evidence of deteriorating fundamentals. This is caused by a change in sentiment.

On 20th March, the BTI, a sentiment indicator, turned bearish. From that moment I knew that stocks were at the forefront of a significant decline.

Contrary to popular opinion, economic and corporate news do not drive stock prices. Stock prices and many other assets such as gold are driven by sentiment. Positive sentiment is bullish for stocks while negative sentiment is bearish. It does not matter whether the news is positive or negative, what matters to the market trend is the state of investors’ sentiment. Corporate and economic news have a temporary impact on prices when they are released, and we can not ignore this fact, but short to long term trends are built on sentiment.

So how do we measure sentiment?

I measure sentiment with the BTI which is a proprietary indicator. This indicator moves up and down according to sentiment, when it reaches an extreme, stock markets change direction.

 

Note on the above FTSE 100 chart, the BTI turned up on 29 November 2012 and continued to rise until 19 March. This period was under the influence of positive sentiment, stock prices rose. The BTI turned down on 20 March, indicating a period of negative sentiment. Stock prices declined.

Another indicator derived from the BTI gave an early warning signal in early March:

 

Positive sentiment was receding as shown by the declining line after 28 February (the top). During the period that followed the stock market continued to rise but the sentiment indicator continued to decline (bearish divergence). That was a warning that the FTSE 100 trend would turn down.

If you've been taken by surprise by the recent sell off I suggest that you subscribe to my FTSE short term forecast. Click here to subscribe.

New 5-Part Video Resource for Commodity Investors & Traders

If you read commodity news, you've probably noticed a trend: Seems like no one likes commodities any more! Here are some recent headlines:

    "Hedge Funds Cut Bets Most Since ’08 as Prices Slump: Commodities "
    "Credit Suisse Lowers Price Targets on Commodities, Prices Sink "
    "World Markets Drive Down Commodity Prices"

The recent downtrend has caught many traders off guard.

So, our friends at Elliott Wave International have released a free video report for commodity traders and investors: "15 Commodity Opportunities You Should Be Watching Right Now."

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Over the course of 5 days, EWI's Chief Commodity Analyst Jeffrey Kennedy will walk you through the biggest trading opportunities in 15 major commodity markets for 2013 and beyond.

The action begins Monday, April 22, when the first video posts. The 5-part video series will be released each day through Friday, April 26.

Learn more about EWI's new commodity resource and sign up to get an email alert as soon as the first video goes online

One Simple Insight That Will Change The Way You Invest Forever

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Follow this link now to get Prechter's jaw-dropping charts, figures and commentary (before this free offer ends)

What Happens in Cyprus, Stays in the Eurozone?

By Ashraf Laidi

What has changed since Friday?

Markets rallied on Friday on news that: i) a deal had been reached and ii) smaller depositors would be spared a levy on their accounts.

Markets then crumbled on Sunday night when Eurogroup president and Dutch finance minister Jeroen Dijsselbloem told the Financial Times that bailing in depositors would be a template for future solutions to the Eurozone debt crisis. When Mr. Dijsselbloem sought to avert the damage saying the bail solution was only an exception to Cyprus, the euro sell-off was already done. And so Cyprus has gone from a “special case” to a “template” in a matter of six days.

€4.2 bn will be obtained by freezing deposits greater than €100K at the wound up Laiki bank, while the bank’s bondholders will also lose all their money. Deposits greater than €100K at the larger bank, Bank of Cyprus, will not be levied, but those above €100K could lose up to 40% as part of the banks’ recapitalization. Instead of using the Eurozone’s bailout funds to save the Bank of Cyprus, Nicosia will turn to large depositors’ funds for bank restructuring.

Please don’t Explain

As EU officials attempt to justify the unique decision to bail in Cypriote depositors (lack of sufficient resources at the sovereign level, inadequate bond borrowing by banks and limiting moral hazard), the more likely that fears of “bail in” contagion across the Eurozone become justified. Not to mention the internal dissent among Troika members with regards to saving smaller depositors. Perhaps it is best that officials do not delve into the details on the uniqueness of Cyprus, otherwise, it will no longer remain unique.

The problem does not stop here.

Currency traders may have grown desensitized to the idea of failed banks, but not to 40% haircuts to large depositors, the wiping out of bank bondholders and the threat of a massive run on banks once the capital controls in Cyprus are lifted.

Even Italian and Spanish bond yields have rallied out of fear. Yields on both 10-year bonos and BTPs rose 12 bps on Monday, eyeing the 5% resistance.

EURUSD closed below its 200-day moving average for the 1st time since mid-November. Although it seemed to have closed the week above its 7-week resistance, the close below its long term trend trend is more material. We have always said that breakouts above and below major trend indicators such as 200 and 100-day moving averages in liquid instruments such as the EURUSD (25% of the daily turnover in the spot foreign exchange market) tend to be game-changers.  Whether it is the euro’s rise above its 200-DMA in mid-November, resulting from the ECB’s OMT announcement and the successful bond swap for Greece, or the euro’s decline below its 200-DMA in September 2011 on the breakdown of confidence in Italy’s banks and political certainty, the breakout has always been crucial. With 4 days remaining in the end of the week, month and quarter, euro bulls must hope for a close above 1.2850-55. Failure to do so would be a break of an 8-month trendine support, not exactly a small detail.

The euro’s misfortune had been especially highlighted against the price of oil. While US WTI rose to 4-week highs in USD terms at $94.70, WTI broke above a key confluence (55 and 200-DMAs), hitting 6-month highs. As the price of oil in US terms shows marked technical improvement on the weekly chart (eyeing 98), oil in euro terms could be eyeing €77.50 from its current €73.62.

Ashraf Laidi is Chief Global Strategist at Leading Spread Betting Company - City Index

Socionomics Summit 2013: The Social Mood Conference

13 Reasons You Should Attend the 2013 Social Mood Conference

Are you an entrepreneur, investor, trader, finance professional, researcher, professor, social scientist, behavioral economist or an expert in a related field?

If so, there are dozens of reasons to attend The 2013 Social Mood Conference. Here's our "best of" list of those reasons, titled "13 Reasons to Attend the Social Mood Conference." Click here to read the PDF brochure

Reason 1: YOU.

The first and foremost reason to attend The 2013 Social Mood Conference is you.

That's right! You play a crucial role in our exciting event. "What do I have to offer?" you may wonder. The answer is: A LOT! Learn more

Reason 2: Mingle with the best and brightest in social mood research.

From Robert Prechter, the founder of social mood research, to finance professionals, such as Kevin Armstrong, a former investment manager of more than $8 billion in assets, Todd Harrison, the Emmy Award-winning founder of Minyanville.com, and Murray Gunn, the head of technical analysis for HSBC Bank, to enterprising researcher Jon Clifton, the man responsible for Gallup's groundbreaking World Poll, you'll rub shoulders with some of the most accomplished personalities in finance, big data and social science -- today's torchbearers of social mood research. Learn more

Reason 3: Understand the world.

Like our heliocentric solar system, evidence for socionomics -- the reality that social mood drives social action (not the other way around) -- has always been in place. Yet only now is it being explored and understood.

Have we figured it all out? Not even close. But like other breakthrough fields that have come before it, socionomics today is a train that is just leaving the station. Hence your extraordinary opportunity to get on board. Learn more

Reason 4: It's your Golden Ticket to discovering the "next big things" -- for an incredibly reasonable price.

Ask yourself this: What would I have paid to get in on the ground floor of lucrative trends -- in big data, mobile technology, Internet search, personal computers -- if I had the chance to turn back time to five, 10, 20 years ago? $1,000, $10,000, more?

The 2013 Social Mood Conference is your Golden Ticket to identify the "next big things." When you attend this event, you will be equipped to pinpoint the developing trends -- still in their infancy today -- that will shape the future. Learn more

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Social mood research is rapidly expanding its reach into governments, businesses and technologies around the globe.

Some of the biggest and fastest-growing organizations worldwide have discovered that social mood research is an invaluable tool that informs nearly every major decision they make. Learn more

Reason 6: Identify what people want -- before they know they want it.

Understanding why people do what they do is only half the benefit of socionomics. Social mood research also helps you make precise forecasts about what people want -- before they themselves know it. Learn more

Reason 7: Learn how the Emmy-winning founder of Minyanville.com uses "Social Mood as a Leading Indicator to the Stock Market."

As a group, the 14 speakers at The 2013 Social Mood Conference offer a one-of-a-kind meeting of the minds. Yet many of the individuals alone provide enough reason to attend.

One such speaker is Todd Harrison, founder and CEO of MinyanvilleMedia, Inc., who will discuss how he uses "Social Mood as a Leading Indicator to the Stock Market."

Recognize the name? Harrison, a Wall Street veteran and a consummate student of the markets, was featured in the 20th anniversary documentary of Oliver Stone's hit film, Wall Street, and he's a go-to expert for the major financial news outlets and periodicals. Learn more

Reason 8: Hear from the world-renowned poll researchers at Gallup.

A window into the minds of six billion people, Gallup's World Poll tracks what many thought was immeasurable, including key states of mind around the world, such as fear, hope and attachment to one's community.

Jon Clifton and Joe Daly will detail the World Poll's most significant findings, and what all leaders in any organization, industry or government need to know about what people are thinking right now. Learn more

For the next five reasons, plus three bonus reasons, download the free PDF brochure, "13 Reasons to Attend the 2013 Social Mood Conference."

If you would like to receive the free socionomics content each week, sign up here.

This article is syndicated by The Socionomist, a publication of the Socionomics Institute, and was originally published under the headline 13 Reasons You Should Attend the 2013 Social Mood Conference. The Socionomist is designed to help readers understand and anticipate waves of social mood. Copyright © 2013 Socionomics Institute.