• July 7, 2020

ELAM: Stocks Flash Short Term Top, Oil Falters, Metals Break Out - Odessa American: Business

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ELAM: Stocks Flash Short Term Top, Oil Falters, Metals Break Out

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Posted: Sunday, July 21, 2019 5:00 am

Let’s start with the stock market. The Dow Transport Index and the FANG / NASD tech stocks are the leaders. We are now in earnings reporting season. On Wednesday CSX (railroad) reported per share earnings of $1.23. The analysts were expecting $1.35. CSX dropped 10% that day falling from $80 to $70. Other railroad stocks fell as well. And since CSX is included in the Transportation Index, TRAN fell as well.

The Transports now exhibit what chartists term a head and shoulders top. Transports are trading at 10,618. A drop below 10,000 would confirm at least a short term top.

The small capitalization Russell 2000 exhibits the same pattern. And its moving averages are turning down.

This week Netflix NFLX announced it lost 130,000 subscribers. Wham, on Thursday it dropped from $365 to $325. J NFLX raced from $230 in December to $380 in May. Friday’s price suggested the short-term top is now in place. Google GOOGL also looks weak. A lower top seems to be forming at the $1,140 area. The SOX semi-conductor index is struggling to regain its former high as momentum wanes.

Taken together, all this action suggests a sell-off in major indexes into mid to late August.

Oil prices are falling. Price is now below all four moving averages I track. Price has dropped from $65 to $55. This is setting up a re-test of the June low above $50. If that fails expect a return to $42. Notice this is happening in spite of shoot downs of drones and tanker trouble in the Straits of Hormuz. On the weekly chart, a drop under the 200 bar moving average at $53.03 would be very negative.

Natural gas prices are still falling.

The big break out is in gold and silver prices. Gold consolidated around $1,400. It is now breaking out at $1,430. Silver looks to be finally gaining followers jumping to $16.20. We can expect a lot of volatility in these prices. Eventually I expect much higher prices but short term these markets are already getting over-bought. The weekly chart of silver is up 6.1% as I write Friday. Social mood against silver bottomed last November and is now in reversal.

Speaking of social mood, the spat between the ‘Squad’ of four socialist Democrats and Speaker Pelosi and President Trump is exclusionary (send her back!) in the extreme. Eventually, as it did in 1973-74, this negative mood will infect markets already at all time highs. We urged caution a few weeks back. Our outlook has not changed.


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