The Bears Have A Tight Grip on Platinum

Posted on May 17, 2013 by Andrew Thrasher — 1 Comment ↓

Both precious and industrial metals have taken quite a beating this year. Most of the focus has been on gold and silver, which are down 17% and 25% YTD, respectively. The platinum market ($PL_F), while not down to the same degree as the shiny commodities, has also been unable to catch very many bids in 2013.

In February we saw platinum make a double top at $1725 while momentum (RSI indicator) created a slight negative divergence. Price then began to take the elevator down which put the Relative Strength Index into a bear market range. We can see that RSI has been unable to break above 50 as momentum stays depressed.

Next up lets look at the price action of platinum ($PL_F), a short-term symmetrical triangle has formed over the last two weeks. Typically we see this type of pattern occur after a well-defined trend, which isn’t the case for platinum. This is a continuation pattern as price coils between the two trend lines. Based on this mornings price action, it appears we will be having a downward break as $PL_F weakens. We also have the 61.8% Fibonacci retracement level acting as resistance at $1525, which also acted as support in December ’12. The price action coupled with bearish momentum appears to indicate more downside risk for the metal. I’ll be keeping a close watch to see if bulls are able to overtake the Fibonacci resistance and the bearish momentum, if a test is unsuccessful then lower prices could be in order.

Disclaimer: Do not construe anything written in this post or this blog in its entirety as a recommendation, research, or an offer to buy or sell any securities. Everything in this post is meant for educational and entertainment purposes only. I or my affiliates may hold positions in securities mentioned in the blog. Please see my Disclosure page for full disclaimer. Connect with Andrew on Google+, Twitter, and StockTwits.

Where Could High Yield Be Heading?

Posted on May 15, 2013 by Andrew Thrasher — No Comments ↓

Investors have been turning over every rock they can find in the search for yield. Causing the high yield space to be booming as of late. 2012 saw a record amount of high yield debt issued, beating out the previous record set just a few years prior in 2010. With Bernanke doing nearly all he can to suppress rates, fixed income investors are forced to continue walking further out on the risk curve.

The iShares High Yield Corp. Bond ETF ($HYG) is a popular method to play the high yield game. Going back to 2011 we can see that $HYG has been in a fairly large triangle pattern. Typically the closer we get to an apex in this type of pattern the less ‘explosive’ the breakout is, but that doesn’t mean a large move in either direction is out of the question. Momentum (RSI indicator) has been bullish during 2013, finding support at 55 and has been testing this level over the past couple of days. We can also see that bullish volume has been keeping the On Balance Volume (OBV) indicator rising – a sign that buyers continue to step in to move prices higher. Combining the support in RSI, the trend line on OBV and the support line of the triangle on price action we can get a clearer picture if we see a breakdown in the coming days/weeks if $HYG begins to lose its luster.

To continue the theme of a frothy high yield market, Bespoke put out an interesting piece comparing high yield to Treasury debt:

The chart below is from last week’s Bespoke Report newsletter, and it shows the average yield to maturity on the Merrill Lynch High Yield (Junk) Master Index. At a current level of 5.24%, investors have never been paid less to own high yield debt. Yields are so low, in fact, that five years ago the yield on the 10-Year US Treasury was higher than the current yield on junk bonds. In the chart below, the red dots on the blue line represent periods going back to 2000 where the yield on the 10-year US Treasury was higher than the current yield on the High Yield Master Index. With yields this low, high yield bonds are anything but high yielding.

Source: High Yield Yields Less Than Treasuries Five Years Ago (Bespoke)

Analyzing the Drop in the Australian Dollar

Posted on May 13, 2013 by Andrew Thrasher — 1 Comment ↓

The Aussie Dollar ($FXA) has been experiencing some weakness with momentum turning bearish. However there are a few bright spots for the currency down under. In March I wrote about the bullish COT data for the Canadian dollar, British Pound, and the Australian Dollar. All three put in gains in the following weeks. $FXA is now seeing similar action it the latest COT data while still experiencing headwinds from the increase in selling.

Here’s a piece:

Over the last month the Aussie dollar ($FXA) has been experiencing some weakness, dropping 5% in April. Let’s take a look at some of the earning warning signs that lead to the drop as well where the Aussie dollar could be heading.

While the drop has been quick, there are some signs we can look at that foreshadowed the move and help us examine future charts of not only the Aussie but other securities as well. In early April the Currency Shares Australian Dollar ETF ($FXA) attempted to break above resistance set over the previous twelve months at $105.

Source: Analyzing the Drop in the Australian Dollar (TraderPlanet)