BROAD STOCK MARKET and CRUDE OIL UPDATE (2:45 pm EST)
Last Thursday I stated that if the DOW backed down a bit I would consider going long for a rally into the end of the month. It didn't back down so we did not get an opportunity to buy, but it is now rallying strongly back towards its all-time high of 17,152 so we are on target for a new high (or double top) into the end of August and first week of September. There is a strong possibility that this market will turn down from that high and take a significant correction of 10% or more. My focus now will be to look for a point to sell short at that time. The DOW, S&P 500 and NASDAQ are all rallying strongly; in fact, momentum in the NASDAQ has turned 100% bullish.
Significantly, though, directional momentum in the DOW remains strongly bearish. The persistent bearish momentum in the DOW charts may be telling us that the current rally will not get very far and a significant correction may be imminent. The S&P 500 and NASDAQ are already making new highs for the year. If the DOW does not exceed its 17,133 high by the end of next week, we could have a strong case of intermarket bearish divergence which would support the idea of a major correction. On the sidelines for now.
In last Thursday's blog on crude oil I stated:
" The sharp price drop today confirms my recent observations of the current crude cycle turning down and momentum signals are now 100% bearish in the charts..... Any significant rally now may present an opportunity to sell short, but in terms of timing we are approaching the end of the current cycle. It might be best to wait for the final bottom before trading this market."
So far we haven't seen any rally to sell short and prices have moved significantly lower as we near the end of this cycle. A rally now into the first week of September might still give us a good point to sell short (especially if it is synchronized with a rally in the broad stock market), but prices may just continue falling from here and form a bottom instead. We will wait and see how prices move into the end of next week. Still out of this market.
Last Thursday I stated that if the DOW backed down a bit I would consider going long for a rally into the end of the month. It didn't back down so we did not get an opportunity to buy, but it is now rallying strongly back towards its all-time high of 17,152 so we are on target for a new high (or double top) into the end of August and first week of September. There is a strong possibility that this market will turn down from that high and take a significant correction of 10% or more. My focus now will be to look for a point to sell short at that time. The DOW, S&P 500 and NASDAQ are all rallying strongly; in fact, momentum in the NASDAQ has turned 100% bullish.
Significantly, though, directional momentum in the DOW remains strongly bearish. The persistent bearish momentum in the DOW charts may be telling us that the current rally will not get very far and a significant correction may be imminent. The S&P 500 and NASDAQ are already making new highs for the year. If the DOW does not exceed its 17,133 high by the end of next week, we could have a strong case of intermarket bearish divergence which would support the idea of a major correction. On the sidelines for now.
In last Thursday's blog on crude oil I stated:
" The sharp price drop today confirms my recent observations of the current crude cycle turning down and momentum signals are now 100% bearish in the charts..... Any significant rally now may present an opportunity to sell short, but in terms of timing we are approaching the end of the current cycle. It might be best to wait for the final bottom before trading this market."
So far we haven't seen any rally to sell short and prices have moved significantly lower as we near the end of this cycle. A rally now into the first week of September might still give us a good point to sell short (especially if it is synchronized with a rally in the broad stock market), but prices may just continue falling from here and form a bottom instead. We will wait and see how prices move into the end of next week. Still out of this market.
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