Running Away
This content is for members only
Posts
Midweek Cycles Update – March 30th
This content is for members only
Losing Shine
This content is for members only
Midweek Cycles Update – March 23rd
This content is for members only
Dollar Setback
This content is for members only
Midweek Cycles Update – March 16th
This content is for members only
Crude Oil Trap
Crude Oil Trap
The price correlation between the Crude and equity Cycles was on full display last week. The only real difference is the relentless nature of Crude’s surge higher. Crude was so oversold and bearish sentiment so elevated, that its march higher from the Investor Cycle Low has been unyielding. On the surface, this appears to be bullish, but I feel the setup is ripe for a Crude Oil trap.
The action appears to be a classic bear market squeeze, as traders who bet big on a continued decline have been forced to cover their Shorts. And in the process, Crude’s mood has quickly turned. The mood was bleak and extremely bearish just a month ago, but we’ve now begun to hear opinions that the bear market has ended and that Crude has seen the bottom.
Don’t believe it. In my opinion, the current bear market is still in its early stages, and the current move higher is just a sentiment-clearing event. I will concede, however, that the move higher is strong enough that it is likely to continue for some weeks. I am targeting early April for a top. In the shorter term, however, there is the potential for a Daily Cycle Low (DCL), one that will shake the confidence of the bulls.
Daily Chart
The size and speed of the rally in energy producers – over 30% in a few weeks – confirms that a new Investor Cycle (IC) is underway. As a result of the move, the percentage of energy sector stocks showing a bullish P&F (BPENER) chart has hit a record 95%, matching levels not seen in many years, if ever. The BPENER level is a testament to the extreme nature of the recent rally, and provides a reason to be cautious now.
In the past, every Crude IC top has corresponded with a BPENER level of over 80%. It’s well over that now, but since it appears that the current rally has serious speculative power behind it, I believe that the current elevated reading is likely to persist for some weeks. Still, the level of the indicator suggests that Crude Oil has entered the topping area of the IC, and it is unlikely that the current IC can continue more that 3-4 weeks higher.
The weekly and monthly charts always allow us to better understand short-term action. They also provide needed perspective to day and swing traders, who can form powerful and unfounded biases from their observations of short-term moves.
This recent Crude rally has been both powerful and convincing, but we must appreciate that it is only a short-term rally. On the weekly timeframe, it is an inconsequential blip in a much larger and more enduring bear market decline. Just 4 weeks removed from a 17-year low, Crude has given us only a mean-reversion rally so far and is now setup to provide a crude oil trap for unsuspecting bull.s
Crude Weekly Chart
The Financial Tap publishes two member reports per week, a weekly premium report and a midweek market update report. The reports cover the movements and trading opportunities of the Gold, S&P, Oil, $USD, US Bond’s, and Natural Gas Cycles. Along with these reports, members enjoy access to two different portfolios and trade alerts. Both portfolios trade on varying time-frames (from days, weeks, to months), there is a portfolio to suit all member preferences.
You’re just 1 minute away from profitable trades! please visit: https://thefinancialtap.com
.
Do Not be Fooled by Crude
This content is for members only
Midweek Cycles Update – March 9th
This content is for members only
Finishing Touches (Market Top)
Finishing Touches (Market Top)
In a classic example of the power of Short-covering, the S&P 500 has risen 190 points in just 16 sessions. Market valuations remain at historically extreme levels, so it’s not like the markets are cheap and investors are rushing in to buy value. The economic news remains uninspiring, and announcements continue to re-enforce a recessionary or low growth environment. So once the Short covering has run its course, the only catalyst for a continued rise in equities (back to 2,000 and above) would be the idea that the central bank will become more accommodative again. To some this is bullish behavior, for me, the market is putting in some Finishing Touches (Market Top).
In a case of bad-news-is-good-news for the markets, it’s clear that equity over-valuation exists because of FED policies. For several years, the FED has responded to bad economic news by increasing liquidity, and this has pushed asset prices higher. But the FED’s ability to safely provide liquidity is not unlimited, and it appears that the FED’s powerful accommodative policies have been exhausted for now, leaving asset prices vulnerable at current levels. Unless economic announcements become much more negative, forcing the FED steps back in with some sort of stimulus, the bear market in equities will almost certainly continue.
Since 2015’s broad topping pattern, equities have frequently moved sharply in both directions. The extreme nature of the moves makes predicting the day-to-day markets extremely difficult, which is why traders find it so difficult to profit in an environment like that we have today. In the short term, however, Daily Cycle timing and the market’s overbought status greatly favor a reversal and decline toward the next DCL.
The Financial Tap – S&P Daily Chart
There is clarity again in the S&P’s Investor Cycles, especially with a Three White Soldiers pattern in place. Three straight weeks of solid gains have lifted the S&P sharply to close back above the 26-week moving average. The current rally will draw the bulls back in and swing sentiment back to the bullish side, setting up another decline.
Since I believe that equities are well into a bear market, the recent strength should be seen as only counter-trend. We’ve had 2 significant Investor Cycle declines since August, and it appears that we still have some upside “filling” to do before the longer term bear market decline continues. The next step is a Daily Cycle Low decline, which should get bears excited before price launches in a new DC. I expect the new DC rally will push the S&P back above 2,000 and form the top for the current Investor Cycle.
If this scenario unfolds, I’d expect sentiment to once again become too bullish, at a time when the equities Cycle has the time and room to sell-off in a confined fashion. But this scenario is not a given – if the bear market is underway, greater-than-expected downside risk is always present and the bottom could fall out of the market at any time.
The Financial Tap – Weekly Chart
The Financial Tap publishes two member reports per week, a weekly premium report and a midweek market update report. The reports cover the movements and trading opportunities of the Gold, S&P, Oil, $USD, US Bond’s, and Natural Gas Cycles. Along with these reports, members enjoy access to two different portfolios and trade alerts. Both portfolios trade on varying time-frames (from days, weeks, to months), there is a portfolio to suit all member preferences.
You’re just 1 minute away from profitable trades! please visit: https://thefinancialtap.com