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II Insight 


4 August 2009, Edited by Tarquin Coe

Global leaders in Technical Analysis since 1947

    
    
Welcome to the August edition of II Insight.
 
Wow! How things have changed since the last report. In the July report equities were looking vulnerable and just as they looked like they were going to fall off a cliff, with many analysts screaming “head and shoulders top”, they reversed sharply, pummeling the bears.
 
Markets are fickle and turnarounds won’t get captured in a monthly report, such as this. That’s one of the reason why we launched a shorter term product this year called the 'Coe Report'. Subscribers to the Coe Report were not caught short and were prepared for the monster rally 35 minutes ahead of time.
 
Up until July-8, the market low, we had been trading defensively, owning ETF bond funds, shorting cyclicals and buying consumer staples.  In the July-8 report we stated If 880 holds up into the close today, then a bounce is likely over the next few days towards the upper end of the range - the 930 to 950 region. WATCH for a possible afternoon turnaround from 2pm onwards today”. The rally started at 2.35pm that day and we immediately unwound our defensive portfolio and have actively bought the market ever since. Once our target of 950 was satisfied, we immediately raised the bar to 1014. Yes the market has been overbought for some time but this is a rare “super” rally, a market phenomenon that feeds on disbelief and the doubting Thomas’s.
 
We are introducing a monthly subscription to the Coe Report for just $35 a month. There will be no reports for the first two weeks of August due to summer leave, providing time for any new monthly subscribers to get on-board ahead of the service starting up again on the 17th of August.  Further more, monthly sign ups before August the 17th will get a free months subscription to the “ETF Review” thrown in. Contact our New York office on 914-632 0422 and ask for Grace Ann for further details or sign up online.
 
    
    
Equities are not the only game in town!
 
Whilst the rally in the equity market has proved more powerful than most of us expected, we should not overlook what is happening in the Commodities market.
 
A couple of years back, many analysts were talking about a "global super-cycle" in commodities, fueled by rising demand from the developing countries pushing up against a relatively limited supply picture (as is certainly the case in many industrial metals).
 
The global downturn knocked the wind out of that argument, and 2008 saw sharp retracements with commodities such as Nickel dropping from $50,000 a ton back down to $10,000.
 
So was the "global super-cycle" argument false? We suspect not. Whilst the rate of global growth may have slowed, there is still plenty of demand out there for raw materials. This is not likely to change and the recent talk in the media of another El Nino has boosted the price for agricultural commodities, many of which are down towards their lows.
 
Investors Intelligence covers the commodity markets with our Daily Commodities Hotline, focusing on the major contracts in London, New York and Chicago.  
 
In todays Daily Commodities Hotline we highlight the Golden Cross seen in the CRB (Commodities Research Bureau) Index - this event has only happened 4 times in the last ten years - three of the moves leading MAJOR bull runs ( note; there was a brief false signal in 2007, but the majority of these signals have proved to be very significant trend running opportunities).
 
If you are interested in following these exciting markets ( which are nowadays much easier to deal in thanks to the growth of ETfs and ETCs), you can subscribe to our daily commodities report for just $199  a year or $20 a month. Great Value! You can sign  up online if you are an existing subscriber by going to the "my account" function. You will find the link to this on the top right hand corner of the website.  
 
Alternatively, give Grace Ann a call on (914) 632 0422. She will be happy to process your subscription for you on the phone.
Tip of the month
 
Are you looking to quickly rank a group of stocks by technical merit? Try using our "technical score" . Simply select a group of stocks - for this example we have chosen  the IBD Retail Restaurants sub-sector. Click on the top of the right-hand column ( titled Strength) and the stocks will be ranked by the strength of their P&F trend ( a combination of price and relative ratio. Maximum score is +21 ( strong price and relative uptrend), the minimum is -21 (price and relative downtrend).
 
 
 
This technique can be a quick method for sorting the sheep from the goats - take a look at the some of the top stocks ( +21) on the list above. We highlight the chart of AFC Enterprises (the owner of the Popeyes Chicken restaurants), pushing up out of the base , breaking the bearish resistance line, there is some pretty good price action coming through from Benihana and the Cheescake Factory.
 
                                
        
    
Chart of the Month
 
This week the bull/bear difference from our Investors Intelligence ‘Advisors sentiment’ survey rallied from neutral. Three weeks ago, the percentage of bulls equaled the bears exactly and since then the spread has moved to +1.1% and then a reading of +11.1% this week.
 
 
The spread literally ran up to the cliff edge and then turned to reinstate the bullish potential.  The significance of the turnaround is evident on the chart. A rising trend channel off the sentiment low of October 2008 has reasserted.  That implies the “advisors” turning more positive over the next few weeks and that can only achieved from the euphoria associated with a rising market.
 
The market rally is not over yet, at least until a test of the early June spread of +24.4%. This could all change of course if the spread takes a dive back through zero!
 
Sentiment Readings are published weekly in the Advisors Sentiment Report, analyzed every Wednesday before the open.
 
 
 
 
    
    
    
    
    
    
    
We hope you continue to find our analysis and charting services useful over the next few months - 2009 is certainly a year to be remembered in the stocks markets.
 
Finally, are you a broker or wealth manager looking to provide technical analysis and added value for your client base? Investors Intelligence can provide daily, weekly or monthly content for your website or research reports -  inckluding featured charts, market reviews, model ETF portfolios and/or custom reports.
 
Many leading players in the financial markets are already using our services including Barclays Stockbrokers, The Wall Street JournalThompson Reuters and many others. Please contact Mark Glowrey in the London office (tel +44 20 7352 4001, email mglowrey@investorsintelligence.com) to discuss your requirements.
 
Best Regards,
 
Tarquin Coe (US Office) and Mark Glowrey (London Office).
 

    

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US Sentiment holds the key
The Advisors Sentiment Survey continues to provide advance warning of major market turning points.  
The analysis and data regularly feature in the international financial press as a key indicator of market reversion.
Examples of these articles can be found on Barrons, NY Times, and Investor's Business Daily.
Read what CNBC said about the biggest switch in sentiment for 7 years.
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