BRIEF UPDATE ON BROAD STOCK MARKET and CRUDE OIL (9:30 om EST)
Wall Street responded positively to last Wednesday's official signing of "phase one" of the U.S./China trade deal. Equities rallied strongly on Thursday and even edged to new all-time highs on Friday. Our strong reversal zone ended Thursday, but I am going to allow an extension on this one, especially as Monday is a holiday (Martin Luther King Jr. Day) and we segue into another (weaker) reversal zone next week (Jan. 21 -29). This market may be showing signs of rolling over so I'm going to hold my short position for now. Once the news of the trade deal subsides, we could easily see the market turn down. If we see intermarket bearish divergence early next week (one or two but not all three stock indices - DOW, S&P 500, NASDAQ - making new highs) then it will be a strong sign of a reversal. On the other hand, any strong rallying and new highs in all three indices would be reason to cover our short position, so stay tuned for updates. If this market is "breaking out" it may skip a corrective dip for now, but it is late in the current medium-term cycle, and a top is due (overdue) to be followed by a significant correction (perhaps 7%). Holding my short position in the NASDAQ (or broad stock market) for now.
Crude oil prices also rallied in the second half of last week. Our long position in this market therefore had some gain to offset slight losses (so far) from our short position in the NASDAQ. Ideally, next week we want to see crude continue its rallying and equities turn down so we can do more than just "break even". Holding my long position in crude.
Wall Street responded positively to last Wednesday's official signing of "phase one" of the U.S./China trade deal. Equities rallied strongly on Thursday and even edged to new all-time highs on Friday. Our strong reversal zone ended Thursday, but I am going to allow an extension on this one, especially as Monday is a holiday (Martin Luther King Jr. Day) and we segue into another (weaker) reversal zone next week (Jan. 21 -29). This market may be showing signs of rolling over so I'm going to hold my short position for now. Once the news of the trade deal subsides, we could easily see the market turn down. If we see intermarket bearish divergence early next week (one or two but not all three stock indices - DOW, S&P 500, NASDAQ - making new highs) then it will be a strong sign of a reversal. On the other hand, any strong rallying and new highs in all three indices would be reason to cover our short position, so stay tuned for updates. If this market is "breaking out" it may skip a corrective dip for now, but it is late in the current medium-term cycle, and a top is due (overdue) to be followed by a significant correction (perhaps 7%). Holding my short position in the NASDAQ (or broad stock market) for now.
Crude oil prices also rallied in the second half of last week. Our long position in this market therefore had some gain to offset slight losses (so far) from our short position in the NASDAQ. Ideally, next week we want to see crude continue its rallying and equities turn down so we can do more than just "break even". Holding my long position in crude.
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