# Archive for February, 2012

## Chart of the Day 2012/02/26: U.S. Gasoline Consumption

Using the EIA’s Weekly Petroleum Status Report, I prepared a seasonally-adjusted chart of U.S. gasoline consumption. Note: This chart includes exports in consumption. U.S. gasoline exports have tripled in the past two years but still amount to less than 10% of consumption.

As you can see, after seasonal adjustment, there has been a strong downtrend. It could change direction at any time, but there is little sign of slowing or reversal just yet.

Note: This model (based on STL) is designed for making robust short-term predictions. As you can read in the article on my last attempt at modeling this series, the model retroactively adjusts the curve in the past. This facilitates seasonal adjustment, but the tail end of the curve is less accurate than the middle of it. If you want short-term projections, this model should easily defeat the more commonly used X-12 ARIMA seasonal adjustment model most of the time. Most U.S. government bureaus use X-12 ARIMA for seasonal adjustment. A notable exception is the CBO, which often uses STL.

## What Day Traders Really Do

The latest in the “What I Really Do” meme:

## February 2012 USDA ERS Oil Crops Outlook

Prices for both soybean meal and soybean oil have been up on lower volume.

This post makes use of artwork derived from works originally found at Wikimedia Commons and used under license.

## A COMPREHENSIVE OVERVIEW OF POPULAR TECHNICAL INDICATORS PART IV: MACD, PART 1

MACD, or Moving Average Convergence-Divergence, is one of the most popular technical indicators, second perhaps only to Bollinger Bands. It is very easy to calculate. The MACD indicator has three components: MACD, which is simply the a-period EMA minus the b-period EMA; the signal line, which is the c-period EMA of MACD; and the “MACD histogram,” which is MACD minus the signal. When the MACD histogram crosses above 0, that is thought to be a bullish indication. When the MACD histogram crosses below 0, it is thought to be a bearish indication.

A quick look at the five-day close-to-close price changes following MACD crossovers (using the popular 12, 26, 9 parameter values) suggests on a historical database of U.S. non-penny stocks (derived from Yahoo! Finance’s free stock price data) geometric average five-day gains of 0.382% following positive crossovers and (0.210%) following negative crossovers. The database contained no delisted stocks, so these results may understate the risk for purchases, but the evidence clearly supports the popular notion that MACD has been a powerful indicator.

## Forecasting with Internet Search Data – Liberty Street Economics

A January 4 article from the New York Fed’s blog, Liberty Street Economics, suggests that Internet search statistics can be used as coincident indicators, demonstrating correlations between keyword search frequency and time-lagged economics data releases. The authors also suggest that Internet search statistics may be useful leading indicators for the movements of financial markets in the presence of language barriers or other impediments to efficient information aggregation.

## Chart of the Day 2012/02/10: October Soybean Meal Futures

October soybean meal futures have broken through resistance at around 323, which recently has been acting as support. They may rise further but are displaying a rising wedge pattern, which historically has often has led to steep declines. Caution is warranted in the near future, especially if the price breaks support.

Incidentally, a feed expert told me last week that soybean meal futures will “likely go up for a couple months and then taper off.” He explained that this was due to seasonal effects. That seems reasonable, although from a purely technical standpoint, soy meal futures look pretty risky right now. And the January USDA Soybean Outlook Report suggests that demand for soybean oil has been low lately. But remember: soy meal is a secondary product. Diminished demand for soybean oil may in fact reduce the supply of soybean meal.

## Stocks & Commodities Magazine Available Free Online

While researching the Aroon indicator earlier today, I noticed that Stocks & Commodities magazine, considered one of the leading authorities on technical analysis, is available for free on their web site. You won’t be able to download the PDF edition without a subscription, but the archives area contains web versions of every volume since 1996.

## A COMPREHENSIVE OVERVIEW OF POPULAR TECHNICAL INDICATORS PART III. AROON, PART 1

The Aroon indicator is a conceptually simple technical indicator. Developed in 1995, it is newer than many of the more popular technical indicators. But for some reason, not all charting web sites offer the Aroon indicator. Yahoo! Finance doesn’t offer it. Neither does CME Group. Two charting web sites that do are Stockcharts and Barchart.

Calculation of the two outputs of the Aroon indicator, $A COMPREHENSIVE OVERVIEW OF POPULAR TECHNICAL INDICATORS PART III. AROON, PART 1$ and $A COMPREHENSIVE OVERVIEW OF POPULAR TECHNICAL INDICATORS PART III. AROON, PART 1$ involves only a single parameter, a span parameter specifying the number of bars over which to calculate the indicator. The most common setting is 25 days. The formulas are:

$A COMPREHENSIVE OVERVIEW OF POPULAR TECHNICAL INDICATORS PART III. AROON, PART 1$
$A COMPREHENSIVE OVERVIEW OF POPULAR TECHNICAL INDICATORS PART III. AROON, PART 1$

Occasionally, people will subtract $A COMPREHENSIVE OVERVIEW OF POPULAR TECHNICAL INDICATORS PART III. AROON, PART 1$ from $A COMPREHENSIVE OVERVIEW OF POPULAR TECHNICAL INDICATORS PART III. AROON, PART 1$ to calculate the Aroon oscillator, which varies from -1 to 1.

A look at the historical 5-day close-to-close returns following 25-day Aroon crossovers on non-penny American stock prices from Yahoo! Finance reveals 5-day returns with geometric averages of 0.039% for positive crossovers and 0.020% for negative crossovers. It doesn’t look very promising so far, but we’ll take another look at the Aroon indicator in the future.

## Chart of the Day 2012/02/02: October Soybean Meal Futures

Happy Groundhog Day!

October soybean meal futures gapped up today and formed a small, white marubozu. You can see several small, white marubozus on this chart, and more often than not, they were followed by down days. There appears to be some upside resistance at 323. If the price breaks resistance that would be a bullish indication, but right now indications are bearish.

## Chart of the Day 2012/02/01: October Soybean Meal Futures

For today’s chart of the day, I have chosen October soybean meal futures. Soybean meal is an important industrial byproduct from producing vegetable oil. It is used for producing animal feed and also a growing number of human foodstuffs such as ice cream, performance beverages and meal replacement bars.

Since the lows in December, soybean meal futures have performed well but have also taken on a characteristic look that suggests the price has been rising too rapidly–it looks almost like a rising wedge, considered to be a bearish pattern. The price may rise a bit further but the upside potential looks uncertain and the downside risks significant. Short strategies look as though they might be more successful, but it is hard to be very sure at this point. If I planned on playing these, for now, I would try waiting for the rising wedge to extend and/or for a clear support break to develop–or for a good reason to take on a bullish position.