Saturday, June 29, 2013

Chart of the month - silver

Yesterday, after quite a fight the long term silver trend line still intact.

Wednesday, June 19, 2013

Marine Transport - world economy weak, marine transport weak as well is not going weaker

Months ago I was writing (in Polish) about marine transport. This is quite interesting sector of the global economy. In my opinion if you want to know how performs the world economy - look at the marine transport. If it's weak so is the global economy. Don't seek the answers in the media - just look at marine transport indices, e.g. the Baltic Dry Index (BDI). This indice is constructed on the basis of time charters rates in bulk carriers sector (bulk carriers transport such commodities as iron ore, coal and agro commodities). So, the behaviour of BDI shows the condition of global bulk transport. Let's look at the chart:


Since June 2008 peak BDI went sharply down till its bottom in December 2008. Then quite a big rally took place but again, since the end of 2009 the index went one more time to its December 2008 bottom. And now, since the beginning of 2012 we have a consolidation phase - the time charter rates are still very low but...they are not falling further.
What's more - BDI can be used as the leading indicator for the whole marine transport sector - it means that if something happens to BDI , then, after some time it happens to transport companies as well.  The grey areas above show that; for example, the area "A" shows BDI going up while Marine Index still going down - but after some time Marine Index follows BDI up.
Now BDI is going a little up, or at least it is consolidating at very low time charter prices range - therefore, due to BDI behaviour,  the prices of marine transport companies aren't falling which is quite a pleasant thing for their investors.

Fundamental situation in the sector is very bad - many companies have financial troubles, many went even bankrupt - generally I can say there is a lot of blood in the sector. And if there is a lot of blood so, according to the old rule of investing, it is the proper time to start looking closely at some companies.
The chart below shows the technical situation of some transport companies included in Marine Index.


As one can spot, most of them (apart from Teekay which operates in liquid natural gas transportation sector and has been in a strong up trend for many years) are consolidating at very low price ranges.

I should also add that some companies, despite the catastrophical situation of the sector, still pay dividends; what's more, very fat ones. But about that....later.

Monday, June 17, 2013

Silver - entry point (the same as gold)

While still in a correction mode, silver seems to generate a strong buy signal.


Bollinger bands, which are below the silver price chart, are the statistical measures - they have nothing to do with the fundamentals of silver. But they show the extreme behaviour of prices, both on buy side and sell side. In case of the red circles we have the buy signals indicated - since 1993 there have been only four such signals so that measure seems to generate long term buy signals.

Another chart below shows the behaviour of big silver speculators.

                                                            source: Proste Dywagacje

As you can see, presently the speculators are the less interested in silver since 2006 - their net position in silver contracts is nearly neutral (neither long nor short). This means rather very pessimistic view on silver prices which is another sign of capitulation of bulls in that market.
And capitulation of bulls is, from contrarian point of view,  a strong buy signal.

Friday, June 7, 2013

Tesla Motors - short squezze coming to the end

Tesla Motors, electric eco-vehicles manufacturer run by Elon Musk, has its days. Most recently it goes up parabolic. Probably one of the main factors behind this super bull market is the short squezze:

On March 15 many players were betting on Tesla shares going down - 28,4% of shares outstanding were being shorted. That's quite a big number. After that day the price of Tesla went parabolically up and on May 15 there were "only" 20,2% of shares shorted. During that short squezze period the price went 228% up.
But O.K. - this is the fact very well known. The aim of that blog is to present in a simple way things not very well known. Therefore let's look below:

                                                                               source: Proste Dywagacje

That chart shows something annoying for the bulls - despite very strong up trend the number of days up is sharply going down. This kind of behaviour rather doesn't support the Tesla bulls.....

Tuesday, June 4, 2013

Precious Metals - bull still intact

Most recently the prevailing opinion is the bull market in gold and silver is finished.
In that post I don't want to present the fundamental reasons that this is not the case. Instead of that let's look at the charts:


Above is the chart of the price action of Central Fund of Canada (the  pool of physical gold and silver). As you can see, the latest selling pressure in precious metals brought the price of that Fund to its long term rising trendline. This is nothing special - just the usual correction in the long term trend. The interesting thing is that the relative strength of that Fund against gold is at historical point where each essential rally started (the red circles).

Now let's look at GLD (SPDR Gold Shares) - the pool of physical gold.

                                                                 left scale - ounces outstanding
                                                                 right scale - price of GLD

                                                     source: Proste Dywagacje

The black line shows the price action of GLD and the green area shows how many ounces of gold the pool consists of. As you can spot, the fund was accumulating gold through many years of the secular bull market in precious metals. And lately something different happened - see the chart below:

                                                           left scale - market value of GLD (usd billion)
                                                           right scale - price of gold (ounce / usd)

                                                                      source: Proste Dywagacje

After breaking the support line above $1500, the capitulation phase started. Investors, anticipating the end of bull market in gold, started liquidating their long positions in gold in panic.

Precious metals are again at their long term rising trendline (CEF chart above). The last phase of that correction occured in the form of panic. And panics are in most cases the last phases of price drops.

Monday, June 3, 2013

US market - what Smart Money is doing today

Periodically I present one of the most important aspects of market action, i.e. what the so called Smart Money does. Smart Money, which means big, experienced investors, is always right. The only problem is timing - it can take months when, at last, we see the effects of the behaviour of these investors. Let's look at the chart:

                                                                                source: Proste Dywagacje

As you can see, Smart Money distribution phase has lasted nearly one year (it started July last year). During that time S&P 500 has been marching up and up, fuelled by media - driven optimistic news, high sentiment readings, FED it as you want. But Smart Money does what it does - sells, no matter how brilliantly the future looks.
What's more - that selling means not only the usual correction but something much bigger.