S & P 400 / Mid Cap Index

Some long term charts of this index. Next resistance: 50% fibonacci retracement.

 

 

OIL vs GAS

Following a suggestion of a good friend, here we can see the OIL / NATURAL GAS ratio.
It interesting to notice the bearish divergences in this ratio (full stochastics), and therefore, we can expect a possible rebound in the index. This mean that, in the near future, the probability of Natural Gas outperforming OIL is very high.
In addition, I suggest to look the long term situation of the Natural gas (here), which is struggling with a support @ USD 2.71.
Time for a reversal in Natural Gas? A big drop coming in Oil?. As it always happen, time will tell.

Natural Gas: shelter?

Some long term charts on the Natural Gas Future. Time of rebound?

Natural Gas Future Weekly chart:                                                                                                                                                                            

Natural Gas Future daily chart:

 

Natural Gas Future daily chart (only price)
 

 

Natural Gas Future monthly chart:

Natural Gas Future Long Term weekly chart:

Exact Fibonacci's confluence at DOW JONES

We have a double confluence fibonacci's resistance in the DOW (both monthly and weekly charts).

Look at the 38.2% Fibonacci's resistance in the monthly chart (9.410 points), 20 years period, from 1989 to 2009.



Then, look the the 38.2% Fibonacci's resistance in the weekly chart (9.409 points, this chart is from the August 10 week), October 2007, September 2009. Link to the previous post (some additional charts)



Both coincides in the 9.410 level.

If we look at the technicals indicators, we can expect that the rally resumes, since they are very bullish, on both, weekly and monthly charts. But it will not be easy to overcome. Tight your stops!

Merck & Co. (MRK) Update

I find very interesting the pattern that MRK is developing, as the MRK fundamentals.

From the fundamentals:

Merck & Co. is one of the largest pharmaceutical companies in the world with 2008 annual sales of $24.2 billion. While Merck produces a wide assortment of medications, a few blockbuster drugs bring in the bulk of its revenue. Currently Merck's four most profitable drugs account for more than half of total sales.
The company's decision to acquire rival Schering-Plough (SGP) will be a major expansion, though, as the two companies' combined 2008 revenues were $47 billion.

Some key ratios:

Explore more MRK Data on Wikinvest

Number of drugs in face I:

Explore more MRK Data on Wikinvest

Revenue, Net Income and Net Margin:

Explore more MRK Data on Wikinvest

Interest coverage:

Explore more MRK Data on Wikinvest

You can read more from:

http://www.wikinvest.com/wiki/Mrk

Technical perspective:

MRK Monthly chart:


Daily Chart:




Be careful, tight your stops if you are holding MRK, because it is developing some divergences (RSI, CMF, Accum/Dist, MACD and Force Index).

Updating MCD

The falling had stopped today in the 61.8% fibonacci retracement. It developed a bullish inverted hammer which requires confirmation tomorrow. From the bear side, it looks like it broke the symmetrical triangle with a little increase in volume. In addition, we can see the bullish divergence in the RSI (parametrized at 7)

2002 megaphone and currently short term supports

Big sell-off with a huge gap down today (which we could expect to be filled by the bulls) and the VIX almost 15% up. This bring back to my memory this 2002 chart, with a similar chart pattern that is developing today (the famous "megaphone", almost so famous like the failed H & S)

Anyway, it is something interesting to remember:


This are the key levels supports and objectives in the short term (established in the previous posts) that I am following:

Dow Jones US financial Index: key support at 232 (23.6% fibonacci). Today's close: 241.02. But, the XLF is developing a pennant?:


Dow Jones Real State ETF (IYR): it broke the key support at 38.5. Today's close: 37.52. Next support: 35.

Dow Jones Industrial: key support at 8.960. Today's close: 9.135.

Dow Jones Transport: key support at 3.420 (38.2% Fibonacci). Today's close: 3.576.

Nasdaq Composite: Huge gap and very close to resolve (or not) the rising wedge:


UUP: it can not break the downward channel. But it looks like it will keep trying:


10 year US treasury Bond yield:

For the first time in the last 9 months, it broke the uptrend channel.


SPY: some people could see a Head & shoulder, which obejctive is 97:

US Financial Index and US Real State Index

To complement the previous post, the charts on the Dow Jones Financial Index and the Real State Index. The similarities between them are very interesting.
Also, I read some articles explaining that the recent rally was a big short covering. But, after watching this charts, I doubt it. Take a look, I would like to know your opinions.

Dow Jones US Financial Index:


Dow Jones US Real State Index ETF (IYR):

Some charts: Dow Jones Ind., Dow Transports & Nasdaq

I try with some Pitchfork's charts and Fibo's. Here, some interesting findings (especially the coincidence in the objectives of the elliot wave counts and the pitchfork's resistances)

Dow Jones Industrial:


Dow Jones Transport:


Nasdaq Composite:

MCD - McDonald's Corp.

When the economy tanks, people change their habits. They start buying more things from discounters like Family Dollar (NYSE: FDO), and more meals from less expensive eateries such as McDonald's (NYSE: MCD).
McDonald's Corporation franchises and operates McDonald's restaurants in the food service industry. These restaurants serve a varied, limited, value-priced menu in more than 100 countries globally. The restaurants are operated either by the Company or by franchisees, including franchisees under franchise arrangements, and foreign-affiliated markets and developmental licensees under license agreements. During the year ended December 31, 2007, the Company sold its businesses in Brazil, Argentina, Mexico, Puerto Rico, Venezuela and 13 other countries in Latin America and the Caribbean, which totaled 1,571 restaurants, to a developmental licensee organization. The Company and its franchisees purchase food, packaging, equipment and other goods from numerous independent suppliers.
There are roughly 32,000 McDonald's outlets worldwide, with the company owning about 6,500 and the rest being franchised.

Explore more MCD Data on Wikinvest

Positive: The revenues are increasing year after year, and also the net income. The business is relative low risk business. Low Beta: 0.7.

Explore more MCD Data on Wikinvest

In a conference call with investors, Chief Operating Officer Ralph Alvarez said that while same-store sales did slow in June, they were still positive and "our U.S. July comp sales are trending similar to or better than they did in June."

Further, he noted the company has begun the rollout of its Angus burger and although it is not yet being advertised nationally, "early results are strong, and customers are telling us they love the products. The Angus burger line will also be accretive to our margins."

Negative: First, the company sold its businesses in Brazil, Argentina, Mexico, Puerto Rico, Venezuela and 13 other countries in Latin America and the Caribbean. I think this will affect future revenue and increase the risk of the company since it is highly exposed to developed economies. But, on the other hand, steering in this direction has resulted in greater cash flow (which increased by 12% in 2007), reduced spending on operations, and less corporate exposure to rising commodities prices.

Secondly, the insider activity: selling. Over the last six months, 5K shares were bought, and 258K shares were sold in insider trading.
In addition, in the last quarter, revenue including results from franchised outlets fell to $5.65 billion from $6.08 billion. Revenue would have risen 4% but for the currency fluctuations.

MCD Quarterly chart and possible EWC (I will need your help with elliot since I am not an EW technician).


MCD Weekly chart with Fibonacci's supports:



MCD monthly chart:
The security is moving within an uptrend channel, close to the support.


MCD weekly chart and possible Elliot Wave pattern for wave 4:


MCD Daily charts:



MCD vs USD Index: MCD is very sensitive to the movements in the USD Index:

Two different patterns in the S & P 500

Which one is the right? A rising wedge, which is not confirmed, or the head and shoulders, which could be confirmed since the breakout of 950 (but I do not see huge volume)?

10 year US Treasury bond yield analysis

I was wondering on the possibility of the yield of the 10/year T-bonds (from now, the TNX) to continue up, if we consider that a sharp correction in the financial markets is very likely.

Then, I started looking at the correlation between the TNX and the S & P 500. Here are the results:


As we can see in the chart, there is no evidence of correlation between the indexes. Then, it is possible to expect new lows for the market, with a flat or rising TNX (like the January - March 2009 period). The red line represents the regression line, which estimates the relation between the two variables, the TNX and the S & P 500. The R square is 0.001, almost null. Number of observations: 2481. From January 1962 to July 2009.

What about the Fed Fund Rate?

Macroeconomic theory tells us that long term interest rates tend to move in the same direction with short term interest rates. Then, we would expect the yield on a long term asset like the 10 year T-bond to move up when short term rate like the federal funds rate moves up.
I read a paper entitled "How the Federal Reserve Fund rate affect the 10-year T-Bond yield" and conclude that the federal reserve funds directly influences the 10 year T-bond yield.

TNX vs. Fed Fund Rate:

In addition, from the fundamental side, I do not expect a new "flight to quality". The reasons:

1) The constant issue of new debt from the treasury. The government debt is loosing "quality".

2) The panic. We do not have a panic or high since October 2008, and it is not expected new volatility for the future as we can see in the dowtrending VIX.

3) The Federal Reserve does not have space to decrease the FED FUND rate given the current levels.

4) In the short term, I expect that the FED will continue with the minimum discount rate, because at the moment inflation is unlikely. But, in the near term, with the economy improving, the inflation threats will oblige the Fed to rise interest rates. This will push up the TNX, and, which is more dangerous, the conventional mortgage rate. See the chart:


Technical perspective:

TNX daily chart:


TNX monthly chart:

As I always say, this is my humble opinion. But this are the facts. It would be interesting to know your opinions.

Source of research:

http://www.federalreserve.gov/econresdata/releases/statisticsdata.htm