The Chart Seminar review
Comment of the Day

May 13 2013

Commentary by Eoin Treacy

The Chart Seminar review

Eoin Treacy's view As ever last week's The Chart Seminar in London sparked some lively debates among delegates from the UK, Switzerland, Singapore and the USA. Some of the major topics of conversation included gold, commodities, consumer-oriented shares, Asia, Europe and the USA. The generosity of delegates who often share their vast experience of the market is one of the features most people highlight as a positive from the seminar. Additionally, I always look forward to The Chart Seminar because taking some time to drill through the disciplines of chart reading from a behavioural perspective usually improves my own trading subsequently.

The prospects for Japan's revival were a lively discussion point as the Yen dropped through ¥100. The re-rating of the country's equity markets continues apace and a significant strengthening of the Yen would be required to begin to question medium-term upside potential.

Gold represented an important topic of conversation not least because it has dropped so precipitously from its overhead top formation and has subsequently encountered resistance in the region of the lower side of that range. Total ETF Holdings of Gold which had been a source of demand for such a long time now represent a source of supply and have not rallied for more than a day or two since peaking in December. At a minimum, gold would need to sustain a move back above $1600 and the 200-day MA to confirm a return to demand dominance.

The consumer staples sector, from which some of the best performing Autonomies emanate, has become overextended following an impressive rally over the last 4 months. The SPDR Consumer Staples ETF has held a progression of higher reaction lows since December and has lost momentum somewhat over the last few weeks. A sustained move below 40 would indicate a swifter process of mean reversion is underway.

Most delegates were interested in the commodities sector and we spent a significant amount of time discussing prospects for related equities. The general conclusion was that the materials sector is bombed out and has recovery potential provided a suitable catalyst emerges.

The renewable energy sector, particularly solar, was also discussed not least because so many of the relevant shares found at least near-term lows in January and have posted impressive rebounds since, albeit from very low levels. The performance to date suggests that the rationalisation of the industry which has been on-going for the last few years may have run its course. (Also see Comment of the Day on April 29th).

At The Chart Seminar we prefer to let delegates suggest the examples for discussion, believing that if the methodology works, it should be applicable to all markets. People generally ask for instruments they have an interest in or those that have performed notably over the previous few weeks or months. I make a point of highlighting the instruments they did not ask for in the second half of the second day to ensure we examine instruments that might be of future interest because they are currently out of favour.

At last week's seminar no one asked for a Chinese index. While the majority of stock market indices have been performing admirably since November, the Shanghai A-Share Index has been a wall flower for much of that time. However it continues to build support in the region of the 200-day MA and a sustained move below 2250 would be required to question medium-term potential for continued higher to lateral ranging.

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