I was wrong about the bottom on February 15-18. My excuse is that I was writing Friday morning not anticipating an 800 point reversal that day which is what happened. As it turned out the call for a vigorous rally was correct. The Dow Industrials DJIA were up every day since. That took the market from the previous Friday low of 23,360 to Thursday’s 25,203 high. If the market is unable to take out that prior low at 23,360, it is liable to re-test the old high of 26,600. That was a mere 1,300 points away, quite possible in a market that has seen 800-1,000 point moves in one day.
Actually I have been most impressed at the recovery action this past week. The percentage of stocks now in bullish formation is as follows.
- NASD Composite: 56 percent
- DJIA: 54 percent
- NYSE: 54 percent
- SPX: 53 percent
So is that significant or just a weak bounce off over sold conditions?
This column February 9, 2018.
China announced its first based oil futures contract which will be traded in yuan, not U.S. Dollars. It will be listed on the Shanghai International Energy exchange. This is all part of China, and India, becoming world players. In the future the U.S.A. will be a player, not THE player.
The bottom line is to expect a low for this sell-off in stocks around February 15-18. That should be followed by a vigorous rally.
The NYSE Advance Decline Line managed a close over both the 13 and 34 day Moving averages which is a positive.
And the DJIA is just above its 50 day Moving average at 25,200. Best guess at this point is this: The DJIA does not reverse and take out 23,300. Instead, it consolidates sideways for a try at the old highs of 26,600. Sure enough it is now 9:47 a.m. Friday and the DJIA is up another 100 points.
Now what about the energy markets? Crude oil has been following the stock market. In fact the correlation is amazing. Last week I was worried that oil prices had registered a fourth wave peak. That might be followed months later by a re-test of the $44 low and lower. A week later, oil bounced just over $58. It is trading around $60 Friday. Again, like stocks, if the previous high of $67 stands, lower prices may prevail.
I was also worried about the weak performance of the XES Energy Service ETF. It rose from $13 to $19. XES has now fallen below its 50, 125, and 200 day moving averages trading at $15.25. It is quite over sold here and tested the last low at $14.50. Perhaps it is building a base at $14.50-15. That appears to be the case for XLE. It has found support at its Fall 2017 base of $66-68.
Bell weather Apache APA has fallen from $49 back to support at $39.
Gold by the way is knocking on its multi-year resistance ceiling of $1,375. Taking out that level will officially continue the rally which began December 2015. Gold has consolidated from its July 2016 high to now.
Meanwhile NBC has thoughtfully provided a complete mental respite from anguishing over the stock and energy markets. This would be the Four Year Anniversary of Silly Games otherwise known as the Winter Olympics. Relax from your La-Z-Boy and watch individuals risk life and limb in what are surely pointless pursuits of, well, you tell me.
The Skeleton, (sport, yeah right) a person rides a small sled from a running start. The person lies face down so their helmet is about six inches above the track. The object is to somehow stay on the sled enduring 5Gs of force and speeds over 80 mph.
For the same fans hoping for a car crash during an automobile race, we have the human equivalent in Snowboard Cross. Four maniacs (make that athletes) start several feet above a steep slope. They launch together, some reaching speeds of at least 60 mph. Control at that point is, well, minimal. This virtually guarantees, as individuals literally soar through the air, that there will be collisions. Last person still standing across the finish line wins.
If you like shuffleboard, you’ll love curling. Players slide stones into concentric circles. That’s it, period. Curling is surely the Olympic sport for those intimidated by the Giant Slalom.
The stock market is not the only thing experiencing extremes.
Follow Dennis at http://www.themarketperspective.com