• October 20, 2019

ELAM: Markets at critical juncture - Odessa American: Business

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ELAM: Markets at critical juncture

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Posted: Sunday, September 1, 2019 5:00 am

I have been expecting lower oil and stock price. The main reason is that both have been falling together. And the Art of the Deal President alternately threatens some measure, the market drops hundreds of points, and then he makes a conciliatory gesture (Xi is a great guy but Friday he was our enemy) and then the market bounces a couple of hundred points back up. Finally September – October are seasonally weak periods for the stock market. Panics have typically occurred in October such as 19259 and 2008.

As I write Friday morning at 10 a.m., the DJIA range has been 26,385 to 26,513. This puts the Industrials right at the upper resistance of 26,400. This is a three day weekend and I expect we will see ‘position squaring’ today. That means those heavily in the market are likely to buy puts as a hedge to the downside.

Another reason for my caution is the lack of a fresh Dow Theory buy signal. This means the Transports should be making a high along with the Industrials, one confirms the other. Instead the Transports are below all four Moving Averages I track. Transports bounced up at 9700 but have not had a strong close above the 200 day moving average this August.

The small cap Russell 2000 looks much like the Transports. These two indexes are usually the leaders in overall market direction.

And today is the end of the week and a volatile month. So many analysts will be looking at the final numbers for clues at the close. But again given that as well as the three day weekend, traders may not show their true feelings until later in September.  At the moment that would be my best guess.

Crude oil has fallen from $66 to the mid $50.  It is down $1.72 this morning. The feeling has been that stalled trade talks will lead to less world commerce and less demand for oil.  And we have noted the move to electric cars in Europe by 2025.

The Eagle Ford and Permian producers remains victims of their own success. Pioneer Resources is down from $175 to $125 since April.

The energy ETF XLE has much the same pattern as Pioneer which is to say down since April. Energy service XES is down another 2% today.

In today’s Wall Street Journal Stephen Moore urges re-financing all U S Debt at these record low interest rate levels. He is correct. The risk in world bond markets has never been greater. Multiple European countries are now selling negative yield bonds. Any move up in rates would make such an issue virtually worthless.

Weeks ago amid rosy White House predictions I urged caution. I see no reason to change that warning. Check www.themarketperspective.com for updates this weekend.

Odessa, TX

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