Five things to consider in the financial markets...

“In financial markets, there are certain price levels that are more important and significant than others with regards to the amounts of supply and demand that exists at these levels.  In addition, prices of securities are always trending.  They are always doing one of three things…either going up, going down or staying the same as time progresses.  BHT utilizes a common sense and simple methodology to identify these levels and trends.  An understanding of these levels and trends will add Alpha to almost any investment process.“

-Mark Putrino, CMT

Introduction:

  • In financial markets, there are certain price levels that are more significant than others with regards to the amount of supply and demand that exists at them. 
  • In financial markets, prices are always doing one of three things.  They are either going up, going down, or staying the same.
  • BHT utilizes a process and methodology that has been developed over twenty years to identify these levels and trends.
  • BHT does not utilize many of the traditional Technical Analysis Techniques such as Fibonacci Retracements or Elliot Waves.  
  • BHT questions and doubts the validity of many of these techniques and believes that they belong in the realm of Bigfoot and UFOs.
  • BHT's philosophy and method is based on experience, common sense, and logic.  The founder spent almost two decades trading illiquid securities and this background gave him the ability to understand how to identify these levels and trends.
  • Knowing what and where these levels and trends are will add Alpha to almost any investment strategy.
  • BHT's goal is to contribute to and enhance your research and investment process.

 

S&P 500 - The action in the S&P 500 has been surprisingly (at least to me...) strong over the past three days.  The downtrend that began in early August as well as resistance around 2,450 have each been broken and it is closing in on new all-time highs.

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Technology Sector - The XLKs have broken the resistance that was at the $58 level.  This level was resistance in early June and then from the middle of July through Tuesday.  This sector is 25% of the S&P 500 makeup.  

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Copper - Copper is trading just above the $300 level.  I would expect it to revert and spend some time consolidating around $300.  This level was important support from 2011 through late 2014.  Then it was important resistance in mid 2015.  It is up about +50% since last October. 

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US Dollar- The US Dollar Index is trading at the lowest level that it has been at since December of 2014.  It is currently trading around $92.35.  Over the past almost three years, the last eight times that it traded down to around the $93-94 level it rallied.  This means that important support may have been broken. 

There is a chance that it trades significantly lower because there is not clearly defined support between current levels and the levels around $80.  That is where it was in mid 2014 when a significant rally followed.  This looks like it may be a classic long-term reversal pattern.

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Interest Rates - Since March 10 year yields have fallen from 2.6% to 2.12%.

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