CTA Trading Desk Morning Report
[7:00am ET] Good morning, Geoff here.
From the weekend report, regarding gold and the long CEF trade:
“The following current conditions are all part and parcel of a major bottom:
•extremely negative sentiment in both the metal and mining shares
•outflows of GLD and GDX at extreme levels – signs of capitulation
•sector breadth extremely oversold
•price oscillators extremely oversold
•CEF moved into a discount to net asset value, which indicates being oversold
That is all well and good but those conditions can continue. So, we were anxiously awaiting the release of gold’s Commitment of Traders report and we were not disappointed. As the large Commercial Trader’s short exposure declined (bullish for gold), hedge funds added a large number of shorts (also bullish for gold). This is a sign that the recent decline moved the largest traders to a less bearish outlook for gold while speculators became more bearish. Although this data is not a perfect timing tool, the shift is very important and is the hallmark of bottoms. This allows the above list to gain traction.”
The important part is the comment on the speculators growing their short positions while the large Commercials were doing the opposite by reducing their shorts. As far as I can tell, the Large Speculator have not been this short since late 2008, which happens to be the last serious low before doubling in price over the next few years.
It seems a little late to be getting extremely short.
Anyway, my point is that if you want a reason for gold to continue to move higher without a retest of the lows, short covering would be the one. I often write about emotions – how do you think those shorts are feeling today? Do you think they are still confident in a profitable decline OR are they hoping for a decline to get out of some or all of their positions before the gold market moves much higher?
Speaking of emotions, the Gold Public Opinion data was released:
That is the most pessimistic report in the 5 years shown, which correlates to the bullet point in the earlier quote from the weekend report; “outflows of GLD and GDX at extreme levels – signs of capitulation”. I would describe that as pure hatred towards the yellow metal.
CEF
The jury is still out on this low but if I was short gold, I would be worried about getting caught in a short squeeze if gold doesn’t make new lows.
Have a great trading day!
Here are the 7:00am ET snapshots of the latest equity market trading results for Europe, and futures prices plus 5-minute charts of the futures for S&P 500, 30-year US Treasury Bond, US Dollar index, Gold and Crude Oil.
| Symbol | Name | Last Trade | Change | Related Info |
|---|---|---|---|---|
| ^ATX | ATX | 2,407.94 |  6.94 (0.29%) | Components, Chart, More |
| ^BFX | BEL-20 | 2,581.30 | 36.30 (1.43%) | Components, Chart, More |
| ^FCHI | CAC 40 | 3,647.12 | 25.20 (0.70%) | Components, Chart, More |
| ^GDAXI | DAX | 7,620.58 | 23.47 (0.31%) | Components, Chart, More |
| AEX.AS | AEX General | 335.10 |  0.19 (0.06%) | Components, Chart, More |
| ^OSEAX | OSE All Share | 519.67 | 0.27 (0.05%) | Components, Chart, More |
| ^OMXSPI | Stockholm General | 369.20 | 0.19 (0.05%) | Components, Chart, More |
| ^SSMI | Swiss Market | 7,454.34 | 4.36 (0.06%) | Components, Chart, More |
| ^FTSE | FTSE 100 | 6,290.03 | 19.59 (0.31%) | Components, Chart, More |
| FPXAA.PR | PX Index | 994.11 | 1.37 (0.14%) | Chart, More |
| MICEXINDEXCF.ME | MICEX Index | 1,484.67 | 0.00 (0.00%) | Chart, More |
| GD.AT | Athex Composite Share Price Index | 996.81 | 5.25 (0.53%) | Chart, More |
http://finviz.com/futures.ashx
http://finviz.com/fut_chart.ashx?p=m5&t=ES
http://finviz.com/fut_chart.ashx?p=m5&t=ZB
http://finviz.com/fut_chart.ashx?p=m5&t=DX
http://finviz.com/fut_chart.ashx?p=m5&t=GC
http://finviz.com/fut_chart.ashx?p=m5&t=SI
http://finviz.com/fut_chart.ashx?p=m5&t=CL
The team will check in during the day, reporting in the Discourse when there is a new entry.
Enjoy your day.
Cara 100 Company research notes from Seeking Alpha
Apple (AAPL)
Feb27: 4:18 AM Apple (AAPL) is due to hold its annual investor meeting today, when Tim Cook is expected to discuss what the company might do with its $137.1B cash mountain as pressure increases to return more money to shareholders. There have even been whispers that Apple will announce a stock split. However, the company doesn’t usually use these events to announce new products or changes in strategy.
Chevron (CVX)
Feb27: 8:41 AM Chevron’s (CVX) investment in Australian shale gas may seem curious given the country’s abundant coal and conventional gas take care of domestic needs, but it’s a smart bet on overseas demand, writes Robb Stewart. Gas prices in Asia – based on long-term contracts indexed to oil prices – are as much as 4x higher than North American prices.
Joy Global (JOY)
Feb27: 6:03 AM Joy Global (JOY): FQ1 EPS of $1.33 beats by $0.17. Revenue of $1.1B (+1% Y/Y) beats by $0.02B.
Merck (MRK)
Fab26: 3:56 PM Merck & Co., Inc. (MRK) declares $0.43/share quarterly dividend, in line with previous. Forward yield 4.07%. For shareholders of record Mar. 15. Payable Apr. 05. Ex-div date Mar. 13.
Target (TGT)
Feb27: 7:31 AM Target (TGT): Q4 EPS of $1.65 beats by $0.13. Revenue of $22.8B (+6.8% Y/Y) beats by $0.14B.
TJX Companies (TJX)
Feb27: 8:46 AM The TJX Companies, Inc. (TJX) intends to declare quarterly dividend of $0.145/share, 26% increase from prior dividend of $0.115, subject to the approval of board. Forward yield 1.32%. The board authorized to repurchase shares of approx. $1.3B-$1.4B. Shares -1.5% premarket. 8:40 AM TJX (TJX): Q4 EPS of $0.62 misses by $0.18. Revenue of $7.7B (+15% Y/Y) beats by $0.05B.
TransCanada Pipelines (TRP)
Feb26:6:24 PM Amid the campaign by Canadian officials to boost U.S. support for the Keystone pipeline (TRP), Gary Doer, Canada’s ambassador to Washington poses this question for the U.S.: “Do you want your oil from Hugo Chavez or do you want it from Canada?”
Vad’s Catch of the Day
Kaimu’s Sound Money
Deron’s Daily ETF Analysis
SPDR Gold Shares ($GLD), an ETF proxy for the spot gold commodity, has taken a beating over the past two weeks. This occurred after $GLD broke down below support of its prior long-term uptrend line, rallied back into new resistance of that broken trend line, then stalled out. Remember that a prior level of support always becomes the new level of resistance, after the support is broken. On the monthly chart below, a good example of this basic tenet of technical analysis can be plainly seen:
On the shorter-term daily chart (not shown), $GLD has also failed to hold long-term support of its 200-day moving average. Now, the $150 area is a key support level because, if it does not hold, $GLD will have confirmed a break of its long-term uptrend line. The weekly line chart below is a great view of the long-term price action since 2009:
A clear breakdown below the $150 level will put $GLD in distribution phase (institutional selling), which could lead to a series of “lower highs” and “lower lows” emerging on the weekly chart over the next several months.
Although we are monitoring $GLD as a potential short selling candidate, the current chart is not actionable because there is not a reliable, low-risk short selling entry point in place. However, if we see a proper entry point in the coming days, we will be sure to alert subscribers of The Wagner Daily, our ETF and stock picking newsletter, of our exact entry, stop, and target prices for this technical swing trade setup (we may actually buy the inversely correlated gold ETF instead).
As per the plan discussed in yesterday’s ETF trading commentary, we established a new short position in PowerShares QQQ Trust ($QQQ) yesterday by buying (going long) the inversely correlated ProShares UltraShort QQQ ($QID). Although $QQQ could grind its way higher over the next few days, there is plenty of overhead resistance and supply around the $67 area, as shown on the daily chart of $QQQ below:
Even if $QQQ makes its way back above the 50-day moving average, there is a plethora of technical resistance just above the $67 area. First, there is near-term resistance of the declining 20-day exponential moving average (beige line). Next, the horizontal band marks resistance of the 50% to 61.8% Fibonacci retracement levels, as measured from the recent swing high down to the February 25 low (here’s a primer on Fibonacci). Additional resistance will be found at the low of the first ugly reversal bar from February 20 (around $67). Finally, all through January, $QQQ struggled to clear the $67 area.
Point and Figure on Canada
OptionOracle
Harp’s Roadmap
Cara on the Metalminers
Cara on the International Markets
CTA Trading Desk Mid-Day Report
CTA Trading Desk Post-Close Report