Technical analysis is a securities market discipline from which investment decisions are based upon. The other market discipline is fundamental analysis. Technical analysis attempts to forecast future price movements based upon past price and volume movements. The idea is to find patterns within the past movements, and use those patterns to predict what will happen to the price in the future. These patterns have been incorporated into models, from which day-to-day decisions are made.
While the Federal Reserve has cut back on its money printing program, the fact of the matter is that the “official” U.S. national debt is closing in on $18.0 trillion. The unofficial national debt (when obligations like Social Security, Medicare, Medicaid, welfare, and now Obamacare are taken into consideration) is closer to $200 trillion.
The Japanese national debt just hit one quadrillion yuan.
Many countries in the eurozone are drowning under debt. The European Central Bank recently started talking about printing money to finally get the eurozone out of its mess.
All of this is very well-known to Profit Confidential readers.
Why do I bring this up again today? I’m back focusing on debt because it is becoming more and more apparent that the only way to reduce the record national debt many industrialized countries have accumulated since the Credit Crisis of 2008 is to print even more money.
And the collapse in the volatility of gold bullion prices could be pointing to just that. To see what I’m talking about, take a look at this chart:
In April of 2013, when the sharp decline in gold bullion prices began, volatility for gold prices was very high. Since then, the volatility index for gold, an index that essentially gauges investors’ fear factor for gold bullion prices, has collapsed.
And when we look at the price chart of gold bullion (see next chart below), we see strong support for the metal just below the $1,200-an-ounce level. This level has been tested twice and on both occasions, gold failed to fall below $1,200. In technical analysis, this is … Read More
Folks, there is a technical breakdown on the charts of the small-cap, growth, and technology groups in the stock market. I can’t say I’m surprised, given the major run-up in 2013 and the lack of any significant stock market correction.
The fact that the majority of the high-momentum technology stocks have corrected more than 20% is a red flag that there could be more breakdowns on the charts. (Read “My Simple, Safe Investment Strategy for Playing Risky Stocks.”)
While I’m not saying that a bear stock market is on the horizon, I do suggest that the stock market risk is above-average at this time, and we could see a bigger correction pending.
On May 6, there was a downside break of the Russell 2000 to below its key 200-day moving average (MA) of around 1,114. This could signal additional downside moves. As of that time, the index was down 4.78% in 2014 and 8.56% from its record high. The previous time the index corrected 10% from its high, it was subsequently met with buying support in the stock market. Note the downward-trending channel on the Russell 2000 chart below.
Chart courtesy of www.StockCharts.com
With the break, you could consider adding the iShares Russell 2000 (NYSEArca/IWM) exchange-traded fund (ETF) as a play on a possible bounce in small-cap stocks, especially if the index corrects more than 10%.
Technology also continues to be fragile, with the NASDAQ south of its 50-day MA. Watch for a possible move and testing of the 200-day MA at 3,982. This index has corrected 6.67% from its recent high and looks to be setting … Read More
The Boeing Company (NYSE/BA) has proved that the airline sector is continuing to progress after the stock easily beat on both its revenues and earnings in the first-quarter earnings season.
Strong wealth generation in the emerging markets in China and Asia are a major factor for the airline sector’s growth. Add in the global economic renewal, and you have an increased demand for air travel. The growth in Asia is particularly strong and will help to drive up the demand for capacity and routes, which will translate into more planes needed.
The airline sector was nearly dead following the tragedy of 9/11, but it has since made a steady recovery. In fact, the airline sector is on target for its second straight year of higher profits, according to research by the International Air Transport Association (IATA).
IATA suggests that North America will hold onto its title as the biggest airline sector market worldwide, with expected profits of around $8.6 billion in 2014. In second place will be the Asia-Pacific airline sector, earning about $3.7 billion; and Europe is expected to come in third with an estimated $3.1 billion. (Source: “Industry on Track for Second Year of Improving Profits – Rising Fuel Costs Largely Offset by Increased Demand,” International Air Transport Association web site, March 12, 2014.)
The evidence is reflected on the chart of the Dow Jones US Airlines Index below, which shows the steady uptrend since November 2012 and a bullish “golden cross,” based on my technical analysis.
While Boeing is one of the top plane makers as far as wide-body jets, I also like … Read More
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