Russian Metal

Action:
The charts above are of SMN (Ultra short basic materials), MTL(Mechtel steel and coal).
As can be seen from MTL, this chart has been in an uptrend for a about an year. Conversely, SMN has been in a downtrend. MTL is at the lower end of its channel.

While this maybe a tempting opportunity for another "iteration" on MTL, there are a few bearish signals on the MTL chart.

1. In the last iteration, MTL failed to make significantly new highs.
2. While the price action has been making new highs, the MACD has been decreasing. This is a typical bearish divergence.

On the other hand, SMN which is 2 times short basic materials, is showing a bullish divergence.

Guess:
On the issue of whether MTL holds its channel, the choice is a difficult one. We are slightly biased towards a breakdown of the channel on MTL.

On an orthogonal issue, Marc Faber (one of the best economists in the world right now) noted in his latest interview that the commodities need to correct and are reaching bubble proportions. Other metal stocks like SID(we own some of this) are also showing a bearish divergence.

Accordingly, we would have a small position in metal stocks. We are looking to sell these stocks as soon as they hit any key technical levels, e.g their 50 moving averages.

Dry bulk shipping

Action:

The charts above are of DRYS(Dry shipping) and DSX (Diana shipping). As can be seen, both of these have been trading in a slowly uptrending channel, YTD. DRYS was facing a steep downtrending resistance line and recently broke out of it (looks like a violation in time). DSX has been in a small triangle formation (in the short term) and we expect it to follow DRYS soon and break the downtrend line. Even better, these stocks are right at the bottom of the uptrend channels.

Guess:
We like these stocks for a rally in july/august. We will be a buyer on weakness in these stocks sometime next week heading into July 4th.

All Eyes on Oil

Action:

As the title suggests, the key to the markets rallying rest on Oil. Infact, ever since OIL surpassed $125, market and OIL have had a neat inverse correlation. No wonder, the question to be answered is when will Oil Crack?

The USO charts (an ETF which reflects OIL: not included here) is consolidating in a sideway flag pattern. Such consolidation is usually not healthy consolidation. We prefer a more downtrending consolidation in order for a leg up. That being said, OIL could ofcourse go higher.

The three charts above are XOM(Exxon mobil), COP(Conocco Phillips) and CVS (Chevron) - three huge oil companies. We look at the clues these charts provide towards the possible direction of oil and the turn date time, since USO is essentially a parallel channel and doesn't provide many clues as to the timing.

We note many bearish indicators on all these charts:-
1. All the charts have formed the 'M' pattern. The 'A' is in the formation. The MA pattern is typically bearish, taking the stock much lower than the neckline.

2. XOM's bottom line has a negative divergence on the MACD, which suggests weakness in the triangle.

3. A similar bearish divergence is seen in COP's chart, every higher high has had a succeedingly lower MACD.

Now the deliverance day on these stocks will come prior to the date the triangle sides meet. We believe we will know by July 10th, since typically the time taken for the formation of the pattern A is lesser than the time for M.

Guess:
We favour the downside in OIL, and plan to take advantage using DTO or DUG. As an indicator, we want XOM to close below the key $85 level for a play on DUG or below $106 on the USO.
Oil is a heavily watched commodity and a very crowded trade. It is prudent to take small positions, since it could all go awry real quick.

Transports

Action:

The charts above (daily(Top) and weekly(bottom)) are of the US transportation average. It is strongly believed that the $TRAN is the harbinger of all the charts, akin to FEDEX & UPS, being reflective of the US economy.
The $TRAN had a nice Head n Shoulders pattern and traded in an upward channel until last month. From then on, it has been in a downtrend, and broke the upward channel this week.
This doesn't mean that the upward momentum is lost, it only means that the steeper upward momentum is not sustainable. The chart may trend sideways to upwards in the near term before coming down.

Guess:

Charts in such uptrend channels, when they breakout from the channel often retrace back to the bottom line in the channel which then serves as resistance. The daily stoch on the $TRAN is also oversold, while the weekly still suggests more downside. This is typical of stocks who have been on a huge uptrend and have gone through correction. The 4800-4900 level is also the fibonacci retracement of 68% on the daily $TRAN. It is also the region of the 200d moving average on the daily and the 50W moving averages. These have proven to be resistances in the past. We expect to provide support in the near term. We believe we could have a tad more downside in this average next week until the low 4800s. It would be surprising for us to penetrate this region in one go.
Consequently, we believe a rally upto 5400 or so is imminent in July/August.
What happens after that, can be reevaluated once we have more pieces of the puzzle.

New Zealand Telecom (NZT)

Action:
NZT is a telecom company in New Zealand. This post(pick) is a tribute to Peter Schiff - an economist, whom I adore. This is a conservative play which pays a dividend of just under 7%. It is highly possible that the dividend eventually ends up higher, given the fragile nature of the USD.

Anyways, as seen from the chart, the pattern in this stock is pretty obvious. It is a slow moving stock with a period of 1.5-2 months, from one end of the channel to the other.

Guess:

We are interested in the short term potential of this stock. It seems like a conservative play in the short term. This could go upto 15 in the next month or two. Unfortunately, the company just declared its dividend on June 13th. Probably, it will be at its high point during the next dividend payout.

Dow Jones, Iteration II

Action:
The chart above is the Dow Jones Industrial Average weekly and this is iteration II. Technical analysis is precisely for this reason, not a perfect science, but an art and what catches the eye. Hence once needs to observe the chart and the better it is if multiple charts tell the same story. And with time one becomes better. I hope to get there one day.

Anyways, the DJI weekly has been in a downtrend channel since June/July of 2007 -- surprise (?) -- it was then that the first bear stearns hedge fund went under.

Guess:
One needs to look at many charts, all possible patterns, multiple indicators before before making a trade. Sometimes, the patterns shout out from the rooftops, other times they are sneaky. With the chart above, the channel is somewhat furtive.

Bottomline:
Whichever way we cut it, this market seems due for a bounce to 12500 in the months of july-august.

Dow Jones

Action: The figure above is the Dow jones industrials weekly chart. We are at a crucial double bottom region. The question is will this hold?

Guess: In the short term yes? A couple of reasons - The weekly 200d is rising and is right below this chart, probably another 100 points or so atmost. It could be that we touch down before a rally. Also the stochs on the weekly are now oversold. A rally seems imminent, lasting for a week or two.

Somehow, there seems to be a disconnect between main street, with inflation at an all time high and a stock market rally. While in the long term, we are still in the bear camp, nothing goes straight down or straight up. we believe the rally will again face resistance at the weekly 50d, at which point the chart will complete a Head n Shoulder pattern, leading to a further downside in the DJI by the year end. While, this is one particular scenario - pieces of the puzzle are slowly falling into place and only time will tell us the truth. For now, we speculate only the the evidence at hand. Lets see

Sensex

Action:

The chart above is of IFN(india fund) which is supposed to track the indian sensex. I often use this since, it gives me volume information, while the sensex doesn't (at least on stockcharts).

As we see, this chart had a nice bearish Head n shoulders pattern which broke the uptrend the chart was in since march, and the sell off ensued. The chart is now at a double bottom. The question is will this hold?

Guess:
My guess is on monday morning (June 23rd), the sensex gaps down, pulling a lot of shorts on board, leading amateurs to think the market has broken resistance and pulling them on the short side. Another reason why I believe the sensex is due for a bounce, is there was a huge intraday buying volume on the IFN on friday. The stochs are oversold on the hourly. Finally, whenever you have long fully coloured bearish looking candles, with a close at the lows of the day, it is often a signal for a bounce. finally, there is a small MACD divergence, which is usually bullish. Trading is all about probabilities. The time for shorting the sensex was when the HnS formed. I'd rather be long than short here. Lets see.

Solar power -- LDK

Action:
LDK recently broke out of the resistance around 40. The pattern of breakout is an inverse HnS pattern, which is very bullish.

Guess:
The negative things going for LDK are its overbought stochastics and that the solar sector is not so hot right now. Traditionally, FSLR has kicked off
the solar rallys and FSLR is just about getting to the bottom of its channel near 238. We believe 40 will serve as strong support for LDK. A summer rally for LDK is very much on the cards

Outsource -- INFY

Action:

Infy is a bellweather of the Indian stock market. This IT outsourcing company ADR has been in a decline, since last year, recently it broke the downtrend and the pattern formed has been a bullish inv hns formation.
Furthermore, the breakout of the resistance couple of days back has been on strong volume. We would like to see a couple of days of some more consolidation before another leg up.

Guess:
The pattern action on this stock is extremely bullish. However, the stochs are overbought. While we would like all indicators in our favor before going in for a dive, this is a fun trade for us and a bet on the Indian sensex. We think the stock has legs upto the 52 region, which would be a 10% trade. We would like to buy this stock in the 46 region and keep a stop around 45 or so.