Weekend March 19, 2016
The Bull Case
COMMODITIES CONTINUE TO RALLY ON FALLING DOLLAR AND DOVISH FED -- SILVER WHEATON LEADS SILVER ETF HIGHER -- SOUTHERN COPPER CLEARS 200-DAY LINE -- FEDEX AND DOW TRANSPORTS CLEAR 200-DAY LINES -- % OF NYSE STOCKS ABOVE 200-DAY AVERAGE BREAKS OUT TO EIGHT MONTH HIGH -- NYSE ADVANCE-DECLINE LINE AT HIGHEST LEVEL IN A YEAR -- CANADIAN AND MEXICAN STOCK ETFS CLEAR 200-DAY LINES -- ALL OF WHICH IS GOOD FOR U.S. STOCKS WHICH ARE RISING
John Murphy at stockcharts.com
Numerous headlines speak to the resurgence of positive mood, seen Friday
Dow Turns Positive for the Year as Oil Rises and the Dollar Falls
Oil Hits $40 as Rally Goes On
Weekend WSJ Below
Stock Rally Rewards Big Bets
The Bear Case
Optimism accompanies market tops. With the Dow rallying from the Feb 11 low of 15,660 to 17,481 the market and sentiment returns to the late December highs. But what about the 20/40 year cycle and the sell off so far this year? Is it possible the Dollar just hit a low and oil is done for now?
I sold my position in USO friday afternoon. Here we show a potential five waves up on the 120 minute chart. And that is a 50% rally adding 16 points from the low at $26 in about one month. Time for a rest I would think. We have a lower MACD at bottom. Pulling back to the previous fourth wave low at 9.50 would take some pressure off the chart.
Stocks Dow Industrial
MACD looks toppy as this mimics the oil chart. And the DJIA is back to potential resistance form November.
Despite the vigorous rally, money flow at top has been slim into the Transports. This is the sort of bounce one sees in a bear markets.
Rails have also bounced giving hope to the bulls.
DJUSRR is approaching both the 50 and 200 week MAs, this will be a decisive test. If the bears are right this index turns down at that point.
Friday afternoon I was struck by how similar the formations of March 7-9 are to where CLF is right now. With a lower high forming, I exited 3/4 of this position
while holding all my MSB.
The Dollar has not been near as weak as reported. In fact for the last year it has been in a trading range of 94-101. It is now back at the lower end of that trading range.
It is the Canadian Dollar which has been weak and is now rallying with commodity prices. A Dollar rally from this higher low is probably the most likely near term outcome, especially given the negative press for the dollar.
Central Fund Gold and Silver
CEF is consolidating, but it is up 25% in three months. Here I am not so sure but I am sure I made some money on my last trade.
The Bottom Line
I suspect a top in the markets is more likely than a continuation of the uptrend. I mean this is as good as it gets.
It is amazing just how fast the market went form 10% bullish to 90% bullish, this is typical bear market behavior. Yep, the Year of the Monkey and Volatility. There was a great deal of money to be made if indeed one had the courage to jump on the uptrend after Feb 11.
As I write on Saturday afternoon, protests have caused a massive traffic jam at a Trump Arizona rally. This will only cause Trump supporters to be more determined.
Desperate Tactics Sowell points out the folly of the Republican Establishment Strategy to oust Trump. All of this speaks to the extreme negative social mood we have written abut in this space for the last couple of years. It is here now and it is certainly ugly.
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