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II Insight 


3 Sept 2009, Edited by Tarquin Coe

Global leaders in Technical Analysis since 1947

Welcome to the September edition of II Insight.

 

The Advisors Sentiment Survey provides the “Chart of the month” for the second month in a row as it provides yet more savvy results. The survey from the end of August even got the press excited, with coast to coast articles covering our survey, from the LA Times to the Wall Street Journal.

 

Just a quick update on where the market view stands with the Coe Report. As readers of the August Insight know, the portfolio was long into the end of August. However, on August-28 we stated to subscribers that “we are exiting all long equity trades this afternoon”. Unprecedented action but one of the reasons of the cause for alarm was the plethora of bearish candle patterns, as the annotated chart from that day showed. As the S&P broke down at the start of September the portfolio was 100% cash. We plan to build up a new portfolio of equities and ETFs as opportunities arise and as always, we advise our subscribers ahead of our trades! This service can be subscribed to for just $35 per month, with no commitment. Visit www.thecoereport.com for further details.

 

In this month’s report we also cover Crude Oil, the China ETF and we end by reviewing one of Investors Intelligence’s key propriety indicators.

 

Tarquin Coe, Senior Analyst

www.investorsintelligence.com

 

 

    
    
Chart of the Month - Advisors Sentiment
 
In last month’s report we noted -
 
 “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%.”
 
So yes the market has risen, with US equity markets printing new 2009 highs during August, as the Advisors Sentiment spread has marched higher.

 

 
However, the spread has now exceeded the early June

 

difference of +24.4% and that is clanging our alarm bells. With sentiment at bullish levels, the market is vulnerable to sharp sell-offs, and the decline at the start of September is an example of that.
 
The message is to trade cautiously for the time being. The next buying opportunity will come once the spread has settled back to near neutral levels. Keep up to date with the readings by taking out a subscription to Advisors Sentiment Report. The report is edited by two stock market veterans, Mike Burke and John Gray.

    

 

    
Commodities
 
Front month crude oil continues to trade between two important Fibonacci levels, the upper level of which is yet to be tested. A 23.6% retracement of the 2008 decline sits at $59.49 and a 38.2% retracement stands at $76.28.
Momentum, 14-day RSI, is no longer overbought as it trades across 50, a neutral level. This should provide the slack for another attempt towards the 38.2% Fibonacci level at $76.28.
 
Fib tests are rarely perfect so there could even be a price spike up to $80.
 

Note: looking at the "big picture" in commodities, we continue to monitor the CRB Index for evidence of a return to major bull market conditions. 50 &200 day EMA's have already posted a "Golden Cross" and we watch for confirmation of this on the EMAs. For more on this subject, read last month's II Insight.

Major commodities are covered daily in the Daily Commodity Hotline, with analysis from Cornelia Dichio.         

ETF Review
 
In the ETF Review we started shorting equity ETFs once again on August-28, having been bullish since the intermediate bottom of mid-July.
 
One of the great benefits of ETFs is that it provides easy access to markets that are difficult to invest in. China is one of the first to spring to mind.
 
We analyzed the two China ETFs before the open on August-28 and advised shorting the iShares FTSE/Xinhua China 25 Index Fund (FXI) during the session. In the report we noted “The China 25 Index (FXI) fund is teetering on a breakdown as it groups at its 50-day EMA.” The fund is now breaking away from this average for the first time since March and with awful relative performance, the fund is a sell (negated on a recovery back above the moving average).
The ETF review runs two portfolios. The more conservative, Investment Portfolio, shows an average gain of +6.63% per trade year to date.
 
The ETF Review is available on a monthly basis for $15 a month, with analysis from Tarquin Coe.

        

 

    
    

Investors Intelligence Proprietary Indicators

 

Point and Figure charts have been a staple of analysis at Investors Intelligence since the 1950’s. Veterans Mike Burke and John Gray have amassed 76 years experience of P&F chart reading. P&F analysis is applied to all of our proprietary indicators and presented daily in the US Hotlines. One example of these indicators is the Short-term Composite Indicator.

 

The Short-term Composite Indicator is generated from scores awarded to 29 market indicators (unweighted) and is only concerned with the most recent action. The Indicator oscillates between values of 0 and 100 and provides the first indication of short term moves.

 

On July-13 the Short-term Composite turned up with a P&F three box reversal. This was noted in the US Daily Hotline and we subsequently cherry picked stocks for the Trading and Investment Portfolios.  This continued until the recent topping action by the indicator in the second half of August and we have subsequently taken profits and unwound the Investment Portfolio down to 90% cash. When the indicator turns up from oversold (20 and below) we will look to rebuild the portfolio.

 

 

If point & figure charts are your forte, check out the US Daily Hotline. Contact our subscriptions department (call 914 632 0422)  to request a free two week trial.

            

 

    
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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.
Want to know more?  Click here  - and you can subscribe for just $335 annually.

Historic Advisors’ Sentiment data since 1963 is also available; please contact us for further details.

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