Author Archive: admin
Treasury 10-Year Yields May Rise to 2.4%: Technical Analysis
Treasury 10-year yields may rise to
2.4 percent, the highest level since October, after staying
above the 200-day moving average, CIBC World Markets Inc. said,
citing trading patterns.
Treasury yields on March 14 advanced above the average for
the first time since July and on March 20 touched 2.40 percent,
the highest level since Oct. 28, after trading in a range from
1.8 percent to 2.1 percent for most of this year. Rates will
probably climb after they failed to decline to their previous
range, according to Kazuaki Oh’e, a debt salesman at the unit of
Canada’s fifth-largest lender.
“Yields are more likely to test 2.4 percent again, rather
than falling below” the 200-day moving average, he said.
Ten-year yields were little changed at 2.30 percent at 9:12
a.m. in Tokyo, according to Bloomberg Bond Trader prices. The 2
percent note due in February 2022 was at 97 11/32. The yield
climbed 12 basis points, or 0.12 percentage point, yesterday.
The average over the past decade is 3.86 percent.
In technical analysis, investors and analysts study charts
of trading patterns and prices to forecast changes in a security,
commodity, currency or index.
Efficient Market Theory Disproven – The Nail in the Coffin
In the world of finance, there are a few different ways you can analyze markets and stocks. You have your basic fundamental analysis, which relies on financial reports, ratios, earnings, etc. Technical analysis is interested in the charts and the trends that lie within the charts. You have the more advanced quantitative analysis, which uses complex algorithms to determine price actions. What is value investing? Value investing is the process of investing in companies that have been unfairly beaten down or cheap for some reason, yet the underlying business story is still intact. It’s safe to say that value investing uses fundamental analysis primarily.
Value investing has been around since 1934, when the famous Benjamin Graham and David Dodd wrote Security Analysis. Graham and Dodd were both professors at Columbia Business School, which could be why the school has been in full support of value investing and fundamental analysis.
Academia has since developed a more different definition of the world value. To them, value is more about stocks with a low price/book which means that the stock is cheap based on book value. This strategy has often outperformed other strategies in the last few years. In this case, a growth stock would have a high price/book because investors are paying for growth.
The interesting thing that most people do not understand is that value can provide higher returns than growth. Value is often seen to be slow, conservative and borrowing.
Professor Tano Santos, of Columbia Business School, did research on a very interesting topic. He took ten portfolios, which ranged from extreme growth to extreme value. What they found was that the extreme value portfolio annualized returns of 10.9% compared to extreme growth’s 3.8%.
This means that deeply discounted stocks tend to outperform the growth stocks that most traders and investors go after. The interesting part is, if extreme value outperforms extreme growth over 7% annualized, why are traders and investors so focused on growth stocks over value?
This should not be news to value investors. But there is big news below. When the proponents of the efficient market theory, finally discovered that value truly does beat growth, they had to uphold their theory somehow. They claimed that value beats growth because value stocks are riskier. On a risk adjusted basis, value stocks under-perform growth stocks.
A little bit about the theory: the efficient market theory says that that investors/traders act on all relevant information as soon as it is made available. This means that stocks are priced to the expectations of the investors that are in those stocks.
How have academics defined risk? I quoted Santos below:
The canonical model of risk in finance is the Capital Asset Pricing Model (CAPM). According to the CAPM, beta, the extent to which the returns of a particular security co-vary with the return of the market portfolio, should be the only source of variation in average returns across securities. Thus, if the CAPM is the right model of risk, then it has to be the case that the value premium is only attributable to differences in the betas. Well then, does the extreme value portfolio have a higher beta than the extreme growth portfolio? The answer is no.
This is the nail in the coffin to the efficient market theory. Value stocks beat growth stocks even on a risk adjusted basis, at least risk as defined by CAPM. We have no doubt, that as these ideas are figured out by more academics, they will change their definition of risk. It is very difficult to admit being wrong after all.
However, for now the efficient market theory has been buried by Tano Santos. It is worth studying the theories to understand the theory, just like disproven scientific theories are worthy of study. However, no one should think that the theory has an validity.
See the chart below from the study, which provides some interesting insights:
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Technical Analysis Q&A session
Type: Webinar
Register for this Session
Technical Analysis QA session
Expert: Gonçalo Moreira, Expert Advisor at FXstreet.com
Moderator: Vicky Ferrer
Start: Thu, Apr 05 2012 14:00 GMT
End: Thu, Apr 05 2012 14:45 GMT
Participants: 3 pre-registered participants
Summary:
- Do you feel you’ve learned a lot about trading but you need to integrate it all?
- Do you want to know the intricacies of a particular indicator?
- Are you developing a strategy and need some guidance?
Gold’s Breakout or Gold Stocks’ Breakdown?
If we look back, at the end of February gold was especially hard hit, following Ben Bernanke’s announcement that there would be no additional quantitative easing. This caused the price to fall below its 200-day moving average, a rare occurrence; we urged people to stay away from speculative long positions. In previous times when the price fell below its 200-day moving average (about 30 times over the past 10 years of the bull market), gold stayed down for less than two weeks.
The fundamentals for gold are in place — rising wealth in China, Europe’s financial instability, and high fiscal deficits in the US. Real interest rates are still negative in many countries and we now have Bernanke’s assurance that they will stay that way in the US for the foreseeable future. Although the US debt situation has not been front-page material for a while, let’s not forget that the Fed’s balance sheet is deep in the red. The European sovereign debt crisis is creeping back into the financial news headlines this week, with Spain in focus amid its financial problems. Even though the markets seem to feel that the worst is over, any significant heating up of the EU debt crisis would support safe-haven gold buying.
For the full version of this essay and more, visit Sunshine Profits’ website.
Twitter: @SunshineProfits
Gold seems mercurial lately, sliding up and down and causing some gold investors to gray prematurely. Technical analysis is not an exact science, nor does it act as a crystal ball, but there is comfort and even beauty to be found in patterns that asset themselves every once in a while. And now we are in a self-similar pattern and my firm continues to believe that higher prices for gold are imminent. We have written previously about the long-term buy signal from the SP Gold Bottom Indicator (see Possibility for Bounce Up in the Precious Metals Market) along with many other signals that suggest that now is the time to go long with a portion of one’s speculative money. The recent ups and downs in gold prices this week do not invalidate our position.
Speaking of ups and downs, gold futures traded lower Wednesday, probing for a bottom, along with most other commodities after failing to trade above the psychologically important $1,700-per-ounce level in the previous session. Gold shot higher earlier that week after Fed Chairman Ben Bernanke signaled US interest rates would remain at current ultra-low levels for a few years. Bernanke is already on the record saying he’ll keep US rates low until 2014. That week he reiterated the message, saying, “Further significant improvements in the unemployment rate will likely require a more-rapid expansion of production and demand from consumers and businesses, a process that can be supported by continued accommodative policies.”
Now let’s move to the technical part of this article, which is dedicated today to gold and gold stocks (charts courtesy of http://stockcharts.com).
We begin today’s essay with a look at the very long-term chart. This chart is basically unchanged this week, so last week’s comments still hold true (see Precious Metals: Self-Similar Pattern Still in Place, Gold Bottom Likely In). Gold prices moved sharply higher early last week and then corrected this move. The RSI level suggests that gold prices still have a way to go, and this is consistent with what we see in our analysis of the self-similar pattern from 2006-2007. All in all, the very long-term implications remain bullish.
Since short-term moves in gold are practically always seen along with similar moves in gold stocks, let’s take a look at the latter and check if they confirm the bullish outlook.
In this week’s medium-term HUI Index chart, we see that the bottoming process appears to still be in progress. This is quite comparable to what was seen in the 2006-2007 self-similar pattern. With the short-term correction period for gold and silver likely over, it’s probable that higher price levels will be seen soon for gold stocks and the HUI Index will likely move to the 550 level in the weeks ahead. Please note that gold and mining stocks moved higher after we created the above chart.
The final chart that we would like to feature in today’s article, is the one that shows the Gold Miners Bullish Percent Index. Both indicators (RSI and Williams %R) based on the index are still confirming the current buying opportunity. This is not surprising, given the fact that the miners didn’t move higher last week. Please note that these indicators do not signal the bottom with perfect precision. They flash when the bottom is close at hand, and this is still very much the case this week.
Summing up: The bullish case for gold is still present this week.
Gold’s Breakout or Gold Stocks’ Breakdown?
If we look back, at the end of February gold was especially hard hit, following Ben Bernanke’s announcement that there would be no additional quantitative easing. This caused the price to fall below its 200-day moving average, a rare occurrence; we urged people to stay away from speculative long positions. In previous times when the price fell below its 200-day moving average (about 30 times over the past 10 years of the bull market), gold stayed down for less than two weeks.
The fundamentals for gold are in place — rising wealth in China, Europe’s financial instability, and high fiscal deficits in the US. Real interest rates are still negative in many countries and we now have Bernanke’s assurance that they will stay that way in the US for the foreseeable future. Although the US debt situation has not been front-page material for a while, let’s not forget that the Fed’s balance sheet is deep in the red. The European sovereign debt crisis is creeping back into the financial news headlines this week, with Spain in focus amid its financial problems. Even though the markets seem to feel that the worst is over, any significant heating up of the EU debt crisis would support safe-haven gold buying.
For the full version of this essay and more, visit Sunshine Profits’ website.
Twitter: @SunshineProfits
Gold seems mercurial lately, sliding up and down and causing some gold investors to gray prematurely. Technical analysis is not an exact science, nor does it act as a crystal ball, but there is comfort and even beauty to be found in patterns that asset themselves every once in a while. And now we are in a self-similar pattern and my firm continues to believe that higher prices for gold are imminent. We have written previously about the long-term buy signal from the SP Gold Bottom Indicator (see Possibility for Bounce Up in the Precious Metals Market) along with many other signals that suggest that now is the time to go long with a portion of one’s speculative money. The recent ups and downs in gold prices this week do not invalidate our position.
Speaking of ups and downs, gold futures traded lower Wednesday, probing for a bottom, along with most other commodities after failing to trade above the psychologically important $1,700-per-ounce level in the previous session. Gold shot higher earlier that week after Fed Chairman Ben Bernanke signaled US interest rates would remain at current ultra-low levels for a few years. Bernanke is already on the record saying he’ll keep US rates low until 2014. That week he reiterated the message, saying, “Further significant improvements in the unemployment rate will likely require a more-rapid expansion of production and demand from consumers and businesses, a process that can be supported by continued accommodative policies.”
Now let’s move to the technical part of this article, which is dedicated today to gold and gold stocks (charts courtesy of http://stockcharts.com).
We begin today’s essay with a look at the very long-term chart. This chart is basically unchanged this week, so last week’s comments still hold true (see Precious Metals: Self-Similar Pattern Still in Place, Gold Bottom Likely In). Gold prices moved sharply higher early last week and then corrected this move. The RSI level suggests that gold prices still have a way to go, and this is consistent with what we see in our analysis of the self-similar pattern from 2006-2007. All in all, the very long-term implications remain bullish.
Since short-term moves in gold are practically always seen along with similar moves in gold stocks, let’s take a look at the latter and check if they confirm the bullish outlook.
In this week’s medium-term HUI Index chart, we see that the bottoming process appears to still be in progress. This is quite comparable to what was seen in the 2006-2007 self-similar pattern. With the short-term correction period for gold and silver likely over, it’s probable that higher price levels will be seen soon for gold stocks and the HUI Index will likely move to the 550 level in the weeks ahead. Please note that gold and mining stocks moved higher after we created the above chart.
The final chart that we would like to feature in today’s article, is the one that shows the Gold Miners Bullish Percent Index. Both indicators (RSI and Williams %R) based on the index are still confirming the current buying opportunity. This is not surprising, given the fact that the miners didn’t move higher last week. Please note that these indicators do not signal the bottom with perfect precision. They flash when the bottom is close at hand, and this is still very much the case this week.
Summing up: The bullish case for gold is still present this week.
EUR/JPY Technical Analysis: April 3, 2012
Forex4you
The EUR/JPY pair is trading in a range which may be a triangle or a topping pattern. It is currently at the range lows and where it has found support and it now seems probable that it could rally up to the consolidation highs at 111.00. Another possibility is that the pair will break down through the trend-line from the January lows and continue down in a bearish move to the 106.25s, the 100% extrapolation of the width of the range.
Disclaimer:Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data .
Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Write your thoughts here
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Authors: ForexPros
EUR/JPY Technical Analysis: April 3, 2012
Forex4you
The EUR/JPY pair is trading in a range which may be a triangle or a topping pattern. It is currently at the range lows and where it has found support and it now seems probable that it could rally up to the consolidation highs at 111.00. Another possibility is that the pair will break down through the trend-line from the January lows and continue down in a bearish move to the 106.25s, the 100% extrapolation of the width of the range.
Disclaimer:Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data .
Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Write your thoughts here
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Authors: ForexPros
EUR/USD Daily Outlook April 3, 2012
By: Christopher Lewis
The EUR/USD pair recently broke out of a resistance area that had been very difficult on the bulls. However, the pair hasn’t exactly caught on fire since then. The 1.3250 to 1.33 level was the resistance area that was so frustrating to the bulls, and now it looks as if it is going to be supportive – classical technical analysis.
However, there are a lot of potential landmines in the European Union, and because of this I am somewhat hesitant to own the Euro on the whole. As a perfect example, the Euro can’t gain on the Franc, which is being worked against by its own central bank! This shows just how weak the Euro is overall. Because of this, I haven’t bought this pair lately.
Tight market
The market in this pair looks as if it is going to be tight. The 1.35 level above is massively resistive, and it isn’t until we get a daily close above that mark that the bulls will have a lot of room to run. Quite frankly, the hammer from Monday looks well enough, but if you were to go long in this pair on a break of the top of it – you only have about 80 pips or so of room. This isn’t enough in my opinion to risk this.
Yes, I do see that the upside is probably the more likely of the two, but I also see that the real support and resistance from a longer term point of view is 1.30 and 1.35. With this in mind, it is at these levels I wish to take any trades, and I believe that the more likely of scenarios is that we will see a pop in this pair, followed by weakness at the 1.35 level. Once that happens, I wouldn’t hesitate to sell this pair as it looks like we could see a move back down to the 1.30 level before it is all said and done. I simply don’t see the current support and resistance level at the 1.3250-ish level as anything more than a minor level.
EUR/USD Daily Outlook April 3, 2012
By: Christopher Lewis
The EUR/USD pair recently broke out of a resistance area that had been very difficult on the bulls. However, the pair hasn’t exactly caught on fire since then. The 1.3250 to 1.33 level was the resistance area that was so frustrating to the bulls, and now it looks as if it is going to be supportive – classical technical analysis.
However, there are a lot of potential landmines in the European Union, and because of this I am somewhat hesitant to own the Euro on the whole. As a perfect example, the Euro can’t gain on the Franc, which is being worked against by its own central bank! This shows just how weak the Euro is overall. Because of this, I haven’t bought this pair lately.
Tight market
The market in this pair looks as if it is going to be tight. The 1.35 level above is massively resistive, and it isn’t until we get a daily close above that mark that the bulls will have a lot of room to run. Quite frankly, the hammer from Monday looks well enough, but if you were to go long in this pair on a break of the top of it – you only have about 80 pips or so of room. This isn’t enough in my opinion to risk this.
Yes, I do see that the upside is probably the more likely of the two, but I also see that the real support and resistance from a longer term point of view is 1.30 and 1.35. With this in mind, it is at these levels I wish to take any trades, and I believe that the more likely of scenarios is that we will see a pop in this pair, followed by weakness at the 1.35 level. Once that happens, I wouldn’t hesitate to sell this pair as it looks like we could see a move back down to the 1.30 level before it is all said and done. I simply don’t see the current support and resistance level at the 1.3250-ish level as anything more than a minor level.
US Tech Stocks Might Sink 10%: Analysis
U.S. technology stocks may drop at
least 10 percent after meeting resistance levels formed by the
retracement of losses after the dot-com crash a decade ago,
technical analysts at ING Groep NV and Mig Bank said.
The Nasdaq Composite Index (CCMP) will probably decline toward its
200-day moving average of about 2,704, according to Ron William,
a technical analyst at Mig Bank in Neuchatel, Switzerland. The
gauge rose 0.3 percent to 3,100.34 at 10:57 a.m. in New York
today, extending the gauge’s rally this year to 19 percent.
“The Nasdaq’s acceleration, although positive, is
unsustainable in the short term,” William said in a telephone
interview. “The index is testing a key historical price level
at the halfway mark of what it lost since the crash.”
The Nasdaq, which sank 78 percent from its high point in
March 2000 to its lowest level in October 2002, has recouped
half of that loss, according to data compiled by Bloomberg.
William said the next resistance level for the index, or ceiling
limiting further gains, is 3,120 and the support level is 2,900.
The Standard Poor’s 500 Information Technology Index,
which posted its best quarterly gain since 2002 in the first
quarter as Apple Inc. (AAPL) (AAPL) shares rallied, has reached a resistance
in an upward price channel and may fall to 435-430, said Roelof- Jan Van den Akker, senior technical strategist at ING in
Amsterdam. The measure was unchanged at 496.59 today.
Fibonacci Retracement
The SP 500 technology gauge surged 21 percent in the first
quarter, crossing the 38.2 percent Fibonacci retracement level
of the 83 percent drop between March 27, 2000 and Oct. 9, 2002,
data compiled by Bloomberg show.
“The coming decline will be a buying opportunity,” Van
den Akker said in a telephone interview. “The underlying trend
continues to be bullish.”
Apple’s 51 percent rally since the start of the year (AAPL), which
has pushed its share price above $600, suggests that the Nasdaq
Composite will fall, according to William.
“It was almost a straight-line move to the $600 mark,” he
said before the company’s shares started trading today. “Apple
is likely to see a healthy pullback to the long-time 200-day
moving average, currently at $419.”
William said that the market has been in a counter-trend
rally, meaning the move has gone against the overall bearish
direction of the market. As part of an Elliott Wave pattern, the
market will soon enter a third phase as shares fall, the
technical analyst said.
William added that volatility is historically higher in the
spring and summer months, and this will result in the selloff of
riskier assets such as equities. The market cannot sustain its
current level of optimism, he said.
In technical analysis, investors and analysts study charts
of trading patterns and prices to predict changes in a security,
commodity, currency or index.
To contact the reporters on this story:
Adria Cimino in Paris at
acimino1@bloomberg.net;
Srinivasan Sivabalan in London at
ssivabalan@bloomberg.net
To contact the editor responsible for this story:
Andrew Rummer at
arummer@bloomberg.net