Weekly InfoMovie Report 1

Martin Pring’s

Weekly InfoMovie Report

June 5, 2013

Issue 1051

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US Equity Market -

Sometimes, when prices slip, as they have this week, the technical position improves. Unfortunately, the opposite appears to be the case. This chart, for instance, shows the number of country ETF’s that are reaching net new 40-day highs. It is diverging with the World ETF, the ACWI, just as it did in these previous instances. When confi rmed by a trend break in the price, a correction of some kind followed. This week the indicator resumed a declining trend that it started a while back. In this case, there is no conve-nient small trendline, the violation of which would serve as confi rmation; just the primary up trendline at around $49. If that gives way, expect a nasty drop to follow.

Declining again

Line and 200-day MA around $49

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This chart says the line is unlikely to hold. Recently, the Global A/D Line broke above this trendline, thereby completing a base. Unfortunately, it was a false one, and that has now set up a potential large negative divergence. I said at the time if the upside break did not hold and if this breadth indicator subsequently violated the red up trendline, look out on the downside. I stand by that view, especially as the oscillator in the bottom panel has gone bearish and violated this up trendline.

False break

Bearish momentum

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An indicator that has just gone negative for the US market is the 8-day MA of net new NYSE highs, which has just fallen below zero and generated a red highlight on the chart. This is often a very good indicator, but suffers from the fact that it often generates whipsaws as fl agged by these arrows. Note though, from the tip of the arrows, that these false moves developed when the 30-day oscillator was relatively close to the zero level, indicating that some corrective action had already taken place. The latest signal though, comes from an extremely overstretched reading, hinting that the current signal will be much more powerful.

Sell signal

Overbought

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Credit Markets -

I have been bearish on bonds for some time and believe them to be in a primary bear market. However, we have recently seen that the price oscillator in the second window has started to turn up from an oversold reading and that the volume oscillator in the bottom one was recently a relatively elevated level. That tells us that a mild selling climax has taken place. Consequently, a rally of some kind may well be in the cards. Since it’s likely to be a contra trend one, it could serve as an escape hatch for those who did not get out their pink sell tickets a few weeks ago.

SH

S

Small selling climax

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Currencies -

The Index broke out from a broadening formation with a fl at top a couple of weeks ago and has since pulled back into the pattern. That’s quite normal, but the problem now is that the price has been unable to break out from the formation and both momentum indicators have keeled over. I am not sure if this signals a primary trend reversal, but I do think it places a lid on the currency for a while.

Bearish

Bearish

Back in the pattern.

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Precious Metals -

When the gold shares lead the price of gold to the upside, that’s usually a good sign. Note that both series recently violated down trendlines. Now we see the shares bumping up against the top of a potential base and the metal, in the form of the GLD, is still quite a way from the equivalent position. My feeling is that if we see the shares break to the upside with a daily close in the GDX above $30.60, the GLD will eventually follow with a break of its own above $143.50.

Breakouts

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Commodities -

Once again, we can see the KST for the Dow Jones UBS Commodity ETN, the DJP, in a rising mode but the Special K is still confi ned below the major down trendline. If it’s violated, I think it will provide evidence of a primary bull market. We also need to watch this line at just under $42.

Bullish

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The technical picture has picked up because these two net new commodity high oscillators have fi nally turned up. The next step is to complete the potential base with a decisive move above the $39.25 area.

S

HS?

Decisive breakout needs an intraday

high above $39.30.

Reversing

Reversing

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This chart also shows the commodity arena to be on a knife edge as both momentum indicators are at key down trendlines. Virtually any strength whatsoever would tip this sector into a very bullish mode in my opinion. That would then leave a challenge of this important trendline in the $44-45 area a very real possibility.

S

H S?

At key trendlines

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If commodities start to rally, the ratio between stocks and commodities would undoubtedly violate the up trendline, confi rm-ing negative momentum. The implication would be a change of leadership favoring earnings driven equities over their early cycle leading defensive counterparts.

Bearish for stocks right now.

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The oil stock ratio is also right on a small down trendline but should move through due to the current trend of rising momen-tum. The really big test though, would come from a move above this longer-term down trendline at .14. The line is calculated by dividing the OIL by the SPY.

Right at the breakout point

Bullish

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In Summary:

1. Stocks have further to fall before the correction is over.

2. The Dollar Index is starting to lose some luster.

3. Commodities are ready to break to the upside.