Wednesday, February 17, 2016

Market follow up Wednesday, February 17, 2016

Two points of yesterday's thesis survived today's price action. The USD hung in at the 97.00 - 96.00 level while oil rallied but stopped short of penetrating its first daily resistance level.

DXY Daily Chart

Oil Daily Chart
SPX Daily Chart
Buyers, as you can see (above) from virtually zero sellers in three strait days of trading, have been extremely sure of themselves. But indexes have to meet a much higher standard, compared to other products, before we can stop selling rallies and start buying dips. In the case of  SPX that "standard" is a weekly close above 2130; a new record high and resumption of the uptrend.

Considering weak economic fundamentals I think such new highs would have to involve QE, another zero interest rate policy, or both. In other words, I don't see how, at peak supply, something like OPEC claiming to curb production is going to push all asset classes into new highs. What are we, a single resource global economy now?

Question or comment below.

Happy trading.

Market Follow Up

The three assets classes featured in Sunday's post (CL, SPX, DXY) performed, at the open, in conjunction with my pre-market thesis. Oil rallied, the  broad market rallied, and the US dollar rallied.

The question, now, is what will decouple to the downside and what will continue upward? In very particular order I expect Oil and US indexes to falter while the USD moves forward. Let's start with the hated "export-killing, way-to-expensive, overvalued" USD.

DXY Daily Chart
Do you see (above) anything..... peculiar about price action of the USD? Something that stands out and makes you ask, "hey, I wonder why price just couldn't wait one more tic to snap upward without even touching any of those perfect-looking daily DXY support levels?"

That's exactly what I thought, and I'm giving the DXY a green light to the 98/99 level, before retesting 95, where we'll assess price action on arrival.

Regarding Oil and the broader market we need to decide if oil is leading or following.

Oil Daily Chart
Following from the looks of price on the above chart; buying momentum on the SPX is greater. Although there is a support level forming (ellipse) below a resistance level (blue rectangle) I am not a  buyer of oil here. In my book two resistance levels in a down-trending market beat one support level. That's not to say price can't break through, but rules are there for a reason.

SPX Daily Chart
Same deal for the SPX. My read, from the above chart, says sellers have the advantage despite yesterday's strong move to the upside. I will look at longs to 2000 and 2060 if the above resistance zones are taken out but not buying into such levels during a downtrend.

Question or  comment below.

Happy trading.

Sunday, February 14, 2016

Markets 16 - 19 Feb 2016

If we're going to, in the context of the market selloff and overall global deleveraging of assets, look for longs at the open of next week's trading session (Monday is a US market holiday), we need to know how much more upside is there in oil.

Oil, after all, is the only green light markets have in an avenue of indicators signaling "bleed."

If you're going to buy anything based on oil, look at buying at the CL 27.60 level but keep in mind you only get one shot. Price rallying to any of the high time frame resistance levels listed on the chart below means 'stop looking for a longs' and be ready to sell at the first sign of price capitulation on a lower time frame chart.

Double dipping levels against a strong trend will transfer your trading capital directly into the account of those on the opposite side of your trades. 


Oil: Weekly Chart

My argument against upside pressure for Oil, beyond 33.00, considers the heft of the selloff, the overall downtrend, and too little shortage of supply. Oh, oil has double bottomed at 26.00? Well, a lot of traders (probably long oil) are mentioning that so let's look at what, exactly, oil double bottomed into.

Oil: Daily Chart with exposed double bottom
 Above we can see the touted double bottom, which has created a trading range between 27.00 and 30.00.

Oil Monthly Chart
On the big daddy monthly chart, however, we see that oil price, converging on 22.00, has not only crushed and refused to rally at the origin of its 2004 breakout, it's pushing into a level where markets took a very long time to decide price should go higher.

Further evidence that there will be very short term upside gains, if any, in oil is the US dollar where I expect, aside from direct Fed molestation, buyers to give sellers a beating at 95.00.

DXY Weekly Chart. Caveat: dollar upside could depend on Gold, rather than an inverse correlation with stocks. 
I'm not saying 95.00 is going to be Gettysburg for Dollar sellers, but markets likely remember that DXY closed above par in November 2015. That's going to mean something, for greater US dollar upside, and I think 95.00 is the battleground where sellers could lose. Yes, I know I am somewhat contradicting myself considering all the noisy price action to the left, but...

US Ten Year Yield Monthly Chart
unless treasury yields are going to rally here, which is unlikely without Fed intervention (what are they going to do, raise rates?), I don't see further USD downside or oil/stock market upside beyond short buy side trading opportunities into resistance levels to place sell orders in conjunction with the downtrend.

Question or comment below. 

Happy trading.