factor update, august 11, 2014

8/10/2019 Factor Update, August 11, 2014

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Factor LLC Colorado Springs, CO 80903Web: www.PeterLBrandt.com Email:[email protected]

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Factor Update, August 11, 2014

Note: There will not be an update next weekend. Then, there will be no update the weekend of Aug 30. Due topersonal business, I will not be focusing on the markets for the next three or so weeks. I may issue mid-weekspecial alerts if any particularly interesting trades show up. Because I will not be focusing on the markets, I havetaken an extremely defensive position in my holdings. I have the lightest portfolio I have held in some time.

Market review

Factor Moves are currently ongoing in Canadian Dollar, THC, EWT, X and JSP (not shown). A Factor Move wasclosed in Soybeans. Factor Moves are developing in the NATI, EWY, EWS and Gold. Charts are also shown forSoybean Meal, energy markets, the EuroFX and the S&Ps.

S&Ps

In last weeks update I commented that the decline in the S&Ps could work into the 1890 to 1900 zone to test thelower boundary of a dominant channel (which roughly coincided with the Apr and May highs). The lows on Fridayof 1904 spot and 1890.25 futures satisfied this channel retest, as shown on the weekly graph. Where do we gofrom here? I do not have a clue. As long as the channel remains intact the trend must still be considered as up.
mailto:[email protected]:[email protected]:[email protected]:[email protected]


2/11


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U.S. Steel (X)

The Jul 30 breakaway gap completed a 3-year H&S bottom. The entire rally since early Jul has beenaccompanied by large demand (volume). The QP target was reached this past week. I will replace the QP on a$2 reaction. The target is 47.00.


3/11


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EWS

A couple of Factor members have asked why some of their charts do not look like mine. The reason has to dowith how prices are back adjusted for dividends. The following charts show EWS with dividends reflected (firstchart) and then with dividends stripped out (second chart). All equity ETFs (and individual stocks that paydividends) have both charts available. Which chart should traders analyze? Both!


4/11


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Gold

The dominant technicaldevelopment in Gold isthe ongoingconstruction of aninverted H&S bottompattern. While my biasis that this pattern willbecome an importantlaunching pad for a bullmove, it is also possiblethat this H&S will fail,leading to a sharpdecline toward 1125 oreven lower. A decisiveclose above 1400 isrequired to completethis bottom. The rightshoulder of the major

H&S bottom is anarguable H&S patternwith an up-slantedneckline. I wasenthusiasticallyconstructive on Goldthis past week. But,resistance at 1325 to 1330 could put a lid on this market. Friday was a minor reversal day and could lead totesting of support in the 1285 to 1300 area. I was less convinced going home Friday than I was earlier in the weekthat Gold would be trending higher on an immediate basis. What I believe is that the weekly Gold chart isbecoming mature meaning that the market is ready to declare its hand. A close below 1281 would negate mybullish bias and a close below 1240 would indicate that the next trend is likely down.


5/11


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CAD

The Mar through Sep rally in the Canadian Dollar was a retest of the massive M top completed in Jan 2014. Thispattern has a target in the low 80s. This is where I believe the C-Dollar is headed. What I am hoping forwhich isprobably why we will not get itis a bounce off of the .9100 level toward .9250 to establish a multiple month H&Stop pattern. I am wrong most often when I anticipate how a chart might form. But, every once in a while I amright, and those can be very profitable trades. I will extend short leverage if the market can rally to .9230.


6/11


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EWT

I continue to believe that Taiwan has experienced a major chart breakout. I am interested in extending leverageon a retest of 14.85 to 15.00.

EWY

I really like Asian equity markets. South Korea is right on the verge of a massive breakout. A breach of 67.50 andthen 69.70 would launch a Factor Move.


7/11


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NATI

I really like the ascending triangle on the weekly chart. The daily chart is pausing and waiting to rock and roll. Icould probably find 100 stock charts as equally powerful if I did nothing but scroll through the global stockmarkets. I just do not have time to do this. $45 is not an unrealistic target. I love it when a stock/futures contractpauses at the boundary of a major weekly or monthly graph. This is exactly what is happening in NATI. The dailychart is consolidating right at key resistance. I will risk up to 150 basis points on this stock.


8/11


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Euro FX

The Euro is locked in anever narrowing range onthe monthly chart (notshown). The wide bodiedcandlestick bar (WBB)decline on Jul 22penetrated a trendlinedating back to Jul 2012 andcompleted an 8-month H&Stop on the daily graph.While the H&S target isnear 1.300, a more likelytarget is 1.3150.

THC

This stock is gradually moving higher toward its 61.34 target to qualify as a Best Dressed trade for2014. The stock has a point and figure target of 70 or above. I may choose to let my longs in THC ridepast the target. The 16-month rectangle could provide a significant amount of upward energy, and thisstock could reach 80 will ease.


9/11


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Soybeans

I covered short Nov Beans fortwo reasons. First, I am not abig fan of a trade that remainsat my entry level a month afterI put a trade on. Second,tightness in old crop Soybeans(especially in Meal) continuesto support the market. The Augcontract of Beans is trading ata $2 premium to new crop NovBeans. I believe Nov Beanshave a long way to go on thedownside, but old croptightness could lead to a rallyin Nov Beans. I issued a TweetFriday raising the red flag onbeing short Beans. Aug Beansrallied 16 cents after my

Tweet. Nov Beans couldattempt to close the gapstarting at 1129. That would bea super spot to short NovBeans. I cannot justifyremaining short new crop Beans at this time. In the meanwhile, I will look to Meal for timing the next leg down.

Soybean Meal

Dec Meal continues to form apossible 5-week descending

triangle. I believe that Mealmustlead the Beans lower. I ammore comfortable flat Soybeanswith a sell stop in place to shortthe Meal. If the Meal generatesa sell signal I will take anotherlook at Nov Beans for a low riskshort entry. Meal would be aswing trade. Beans would be aPU/QP trade.


10/11


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Energy markets

I am showing the monthly charts of Crude Oil, Heating Oil and RB Gas to point out the extended trading range inthese markets. While these patterns could be pauses before a price explosion, they also could become importanttops leading to a substantial decline. I do not want to be the bearer of bad news for folks in North Dakota andwestern Canada, but there is no reason technically why RB Gas cannot go back to $2.50 and Crude back to $65.Some people may say, But producers cannot make money at $65. Big deal! Whoever promised producers aprofit? Remember, Crude went to $32.50 in late 2008.


11/11


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factor update, august 11, 2014

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