Economic Growth Trends Have Been Rolling Over (YoY Charts)

Below are charts showing the year-over-year percent changes in industrial production, personal income, personal consumption expenditures (PCE), gross domestic product (GDP), retail sales, and the velocity of M2 (money supply) since 1968. The charts also include recessions. As you can see they've all been rolling over, but some earlier than others. More on this in a moment. You can find this chart at the St. Louis Fed's FRED database.


IYT/WTIC, IYT/SPX See Negative Correlations (Transports vs. Oil and S&P 500)

Today is a big day because I'm introducing the 'correlation' indicator on a few charts. StockCharts.com allows you to chart out the correlation between two securities over any time period. First, I compared the two month relationship between IYT (Transportation ETF), SPY (S&P 500 ETF), DIA (Dow Industrial ETF), IWM (Small Cap ETF), QQQ (Nasdaq 100 ETF) and $WTIC (Crude Oil). At the beginning of February, IYT started to move inversely with WTIC (oil up, transports down), which made sense. During this time the other major market index ETFs either fell (IWM), drifted sideways (SPY, DIA), or rose steadily (QQQ). But then in the middle of the month, IYT completely decoupled from SPY, DIA, IWM and QQQ.

Watch RSI on Monthly GLD/SPY Chart, Testing 20 Month Moving Average

Check this out. GLD/SPY is testing the 20 month moving average on the monthly chart and GLD/SPY's RSI (relative strength index) is at 52.20. Look at the MACD versus the exhaustive peaks as well. What's interesting is the RSI on GLD/SPY hasn't been below the key 50 level since GLD, the Gold ETF, started trading in 2004. If RSI breaks below that level and starts moving between 0 and 50, that would be new structural development for GLD's strength relative to SPY, the S&P ETF. In other words, If GLD/SPY's RSI breaks below 50, and/or the ratio technically breaks down and starts trending lower, it would mean GLD's relative strength and/or price action is underperforming SPY. They can still go up and down in tandem. GLD has outperformed SPY for years now, so in real terms the S&P hasn't done much. But there have been corrections along the way in the ratio. Anyone watching it?

GLD, GLD/SPY Technical Update, Gold Was Dumped After Bernanke's Testimony

GLD, the SPDR Gold ETF, lost 5.31% yesterday after Fed Chairman Ben Bernanke didn't mention QE3 in his testimony to Congress (Zacks Research, Investor's Business Daily). And GLD didn't seem to care that the European Central Bank loaned 530 billion euros to 800 banks in the next LTRO (long-term refinancing operation) to protect the funding markets from a sovereign debt bomb in Europe (EuroMoney, Reuters, Zero Hedge). Check out which banks participated in the LTRO. Was the GLD move based on stability over liquidity (monetary inflation)? Decent economic data was reported as well (Reuters, Business Insider). Today the S&P closed red, but Treasury yields rose. Correlations are starting to get interesting again. Overnight, or last night, gold spot (XAU/USD) bounced off yesterday's lows.

GLD, GLD/SPY Technical Update

Now for some charts. The first chart (at the top) is an intraday 1-minute chart of GLD showing the crash. There were huge chunks of red volume spikes.

The second chart is of the daily. As you can see, the $175 ceiling is a key resistance level to break. I think a breakout would prove that GLD has enough strength to rally to the September 2011 high of $185. It failed to break above $175 twice. Above $185 is the next freedom level.  GLD is currently testing the 50 and 200 day moving averages (red/blue lines), so those need to hold for the bull case to stay intact in the short-term. The last time GLD's 50 and 200 day moving averages crossed was in mid-2008, a few months after and during a deep correction.

Brazil ETF Volatility Index Options and Futures (EWZ, VXEWZ, VXEW)

CBOE Holdings is rolling out futures and options on the CBOE Brazil ETF Volatility Index (VXEWZ). The volatility index measures the implied volatility, or expected move, in the iShares MSCI Brazil Index Fund (Brazil ETF) from its option prices. It's similar to the way the CBOE Volatility Index (VIX) measures the S&P 500's implied volatility percentage, but the VIX uses S&P 500 Index options not SPY options (the S&P ETF). There are options and futures on the CBOE Volatility Index that trade as well. I've covered them on my blog over the years, as well as the VIX futures curve and VIX implied volatility. When will we see futures and options on the Brazil ETF Volatility Index VIX, and a Brazil ETF Volatility Index VIX Short-Term Futures ETN? Ha. Of all places, I found the CBOE Brazil ETF Volatility Index chart at the St. Louis Fed's FRED database.

image source: St. Louis Fed

From CBOE:

Goldman Sachs, Wells Fargo Receive Wells Notices From SEC Relating to Subprime MBS Offerings

Source: woodleywonderworks
Here we go again... The SEC sent Wells notices to Goldman Sachs and Wells Fargo over subprime MBS offerings. How long did lawsuits last after the Savings and Loan crisis in the early 1990s? Here's an interesting article from February 2008: "Study: Subprime Mortgage Lawsuits Outpacing Savings & Loan Crisis" (Insurance Journal).

From Goldman's 10K (page 203):

10Y EFSF-German, French-German Spreads Rising; S&P Lowers EFSF Outlook

Live source: Thomson Reuters
On February 14, when Moody's affirmed its stable outlook and Aaa rating on EFSF debt, I told you to watch this Thomson Reuters chart (updates daily here) with the 10-year EFSF-German bund yield spread and 10-year French-German bund yield spread. Since then, it looks like the EFSF-German yield spread broke through a downtrend line and the French-German yield spread is now testing downtrend resistance. I'm not sure if the chart is linear or logarithmic, but check out the chart with trend lines to see what is happening. On January 17, S&P downgraded France and the EFSF's credit rating to 'AA+' from 'AAA' and lowered France and Austria's outlook to negative, which was the precursor to yesterday's action.

S&P: If Bond Holders Don't Accept Exchange Offer, Greece Faces Imminent Payment Default

1-year GGB yield (source: Bloomberg.com)
After Fitch downgraded Greece to 'C' from 'CCC, and said the planned debt exchange between the Greek government and private sector involvement (PSI) would constitute a "Restricted Default", Standard & Poor's just downgraded Greece to SD or "Selected Default". Everything is riding on the debt exchange, which amounts to a 53.5% loss for PSI bond holders. The S&P analyst mentioned what would happen to Greece if the debt exchange failed to occur.

"If a sufficient number of bondholders do not accept the exchange offer, we believe that Greece would face an imminent outright payment default. This is because of its lack of access to market funding and the likely unavailability of additional official financing. The revised financial assistance program provided by most of the eurozone governments and the Stand-By Credit Arrangement with the International Monetary Fund are predicated on a successful exchange offer."

In other news, The 1-year Greek bond yield hit a high of 821% yesterday (see the intraday chart). Will it hit 1,000%? If interested, below is the full S&P release (source: Standard & Poor's).

EUR/USD Moving On LTRO, Greek Bailout, Eurozone Rescue Package

A lot is going on in Europe...

1) The G20 is working on a $2 trillion rescue package for the eurozone;
2) An IMF 'firewall' fund could include Japan and China (Zhou);
3) The German parliament is voting on the Greek bailout package;
4) The ECB's next 3-year LTRO offering is scheduled for Wednesday (long-term refinancing operation);
5) This could be the last LTRO: "ECB Won’t Commit to Further LTRO, Asmussen Tells Handelsblatt".

EUR/USD is close to testing the 200 day moving average and resistance in the trading channel. It is currently down 0.17% at 1.34274.

Watching USD/JPY, Tokyo Nikkei Stock Index For Confirmed Breakouts

Source: tamakisono on Flickr
USD/JPY (Dollar/Japanese Yen) is currently trading at 81.04, up 11.8% from 76.02 on February 1. Nice move. Additional easing and an inflation target was announced by the Bank of Japan on February 13. From Dow Jones Newswires at Nasdaq.com:

"The central bank's policy board said it will boost the size of its asset purchase program--the main tool for credit easing amid near zero interest rates- -to Y65 trillion from Y55 trillion, by increasing purchases of Japanese government bonds."

As you can see in the chart below, USD/JPY pierced through a major downtrend line from 2007-8, but it still needs confirmation. Now it is down 0.27% at 80.90. It also looks like the Nikkei 225 stock index pierced through the downtrend line from 2007 on Friday (2/24), but it is close to testing the 200 week moving average resistance level.