The Market Perspective

Seasonal Weakness Setting In for Stocks, A Low in Gold?

Tuesday April 29, 2019

 A few items jumped off the pages of the WSJ to me today

 

Google drops 8% in one day in slower sales

Tesla frequently runs out of money now it is running out of time,  the established auto makers are already producing electric vehicles that work and have dealership with mechanics and parts, something Tesla has never offered, TSLA has already dropped $60 B in capitalization, really interesting graph on page B1 today

Boeing still reeling from  7374 problems

Measles cases continue to rise

Gerry Seib - Impeachment Trap for Dems, I agree page A 4

Price swings jolt energy  investors

GLD

The last two rallies failed to develop into anything but I am more hopeful about this one occuring at the 125 day level. MACD is slowly turning up.  121 was support in  January and we had a slight over throw down right here.

GLD 2 Hour

This chart needs some follow through to the upside.

XAU

XAU broke above 71 back in January. If old resistance becomes new support as it should a stand right here at the 200 day MA would be encouraging. So far so good.

A Short Term Top in Oil, Potential Bottom in Gold

Weekend April 28, 2019

Several interesting events occurred as this past week ended.

US stock indexes made new highs.

World stock indexes did not.

Crude Oil suffered a big reversal amid lower earnings from oil companies, and no lack of supply. See our weekly newspaper column .

The Dollar moved to a new high. But gold and the XAU seem to be finding support and rallied near $20.

XAU

The XAU looks to have bottomed around the 71 level. THis suggests a rally into the end of May.

XAU Two Hour

The MAs turn up on the two hour chart confirmed by the PMO at bottom.  And both gold and the US Dollar turned up at the same time. Is gold re emerging as a currency?

There are several gold funds like ASA, PHYS, USERX that could be entered at this level.   JNUG is a 3x bet on GDXJ.

Crude Oil Weekly

This appears to be an outside weekly reversal to the down side. 66+ has been the upside resistance. The market briefly topped taht level Monday only to give that and more back by the end of the week. Recall that oil and stocks have moved together. Crude oil may be topping prior to the seasonal high in stocks due May 9.

% Stocks above  150 Day MA

Here is the reverse of December 24. This makes a double top at the current level of stock prices.

Bottom Line

There is likely a top forming in crude oil followed by a top in US stock indexes. World indexes are trailing the US.

The US Dollar remains strong. Gold is bottoming along with gold mining funds.  Silver like gold is completing a fourth wave down. It needs a close over 15.20 to turn its trend up.

Social Mood

Drudgereport has a link to a story on the 36 public executions held in Saudi Arabia this past week. Teen boys aged 16 and 17 were beheaded.  King Salman has a ways to go convincing the world of the 'new' Saudi Arabia.

With twenty Democrat candidates declared for President, it is a crowded field. And the only issue seems to be oust Donald Trump.  Pelosi is denying it is the Dem Socialist Party but Bernie and AOC get more followers and publicity.

Herman Cain and Oliver North were both out this week, Herman as a FED candidate and North as the President of NRA.  North, with only on term as NRA President took on multi decade Wayne La Pierre showing a disregard for going against a long time entrenched figure.  It seemed foolish to me for North to become embroiled in such a controversial organization. And sure enough he showed a lack of caution reflecting how he came to be known during Iran Contra. Ollie you should have stayed a at Fox.

England can't figure out Brexit, Macron has half the popularity of Trump, Kim is visiting Putin, and Melania is on the couch all by herself. Perhaps this photo sums up the current Social Mood.

All alone on her 49th Birthday.

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GDP Rises 3.2% Q1 2019

Friday April 26, 2019

GDP Rises 3.2%, Markets Still at Resistance

 

JOINT BASE ANDREWS, Md. (Reuters) - U.S. President Donald Trump said on Friday he called the Organization of the Petroleum Exporting Countries and told the cartel to lower oil prices.

"Gasoline prices are coming down. I called up OPEC, I said you've got to bring them down. You've got to bring them down," Trump told reporters.

Yahoo Finance this Friday

I nominate this quote as the official start of the Political Silly Season, the Race to Election Day November 2020.

I thought the Democrats had that award in the bag but clearly the Donald was not to be outdone.

The belief that a personal action can control the price of oil (or anything else) on a world-wide basis is the very opiate of politicians. They want us to believe they can perform magic. If this were true, oil prices would not dramatically swing from $42 to $66 and back to $62. But they instead do just that. Expect more wild promises from both sides over the next 18 months.

As we have noted here so often, social mood towards speculating on oil prices as well as pricing oil as an economic commodity determines price.

Crude oil finally topped $66 earlier this week. The media credited Trump’s squeeze on Iranian oil. But hey three days later Trump claims to have lowered prices. Indeed today oil is trading for $62.57, down 4% just today. The more likely reason is that

• WTIC is up 50% from $42 to $66 since late December, 2018.
• Momentum indicators are in the way overbought zone
• There is no shortage of supply

This drop whacked the Energy ETF XLE which had just topped its 200-day Moving average, down 1.76% today. XES Energy Service ETF never got close to its 200 day MA. This has been a continued source of concern to me as noted in many columns.

The GDP was up 3.2% for 1Q 2019. This is good news but has not moved the stock markets any further. Three weeks ago we urged caution in this space, noting markets had returned to their October 3 highs where they promptly reversed, falling 4,000 DJA points.

We have also had our eye on the precious metals markets We suggested this week would tell if gold managed to start forming a bottom. And here at the end of the week, gold has reversed from its Tuesday low at $1,270 to $1,289. This week someone bought 200,000 puts on UUP, the dollar ETF. A put is a bet the Dollar will fall enough by the third Friday of June to make this a profitable trade. The rise in gold and silver may be confirming an over bought US Dollar.

Bearish Bets on the Buck

Thursday April  25 2019

Trade Alert via the WSJ reports someone bought 200,000 puts on the Dollar ETF UUP yesterday.  That explains the jump in gold $5 which happened yesterday.

No follow through in gold prices today.  Stocks have hit the same levels where they peaked last Oct 2.  And we have the usual seasonal high due in early May.

So  here we are.

Crude Oil Attacks Resistance

Monday April 22, 2019

 

Crude oil is up $1.68 Monday morning or over 2%. This may be a first indication of an attack on the $66 resistance level.

Gold did not hold on to the early $5 gain but it up 50 cents at 11 02 AM CST.  XAU is trading at  72 down 88 cents. XAU needs to find a bottom this week if the rally is to continue.

 

April 19

Friday April 19, 2019

The Recurring Case of April 19, 19

 

We suggested caution regarding the markets in this column two weeks ago.   Some ETF stock indexes have made new highs. While there are many optimistic expectations given the low unemployment numbers, stock market action looks a lot like September 2018. That led to the October 3 top and a 4,000 DJIA drop. That is not a prediction but again a caution. The charts suggest this as a real possibility.

 

Crude oil has yet to break above $66 measured by West Texas Intermediate. Gold should be making a 13.5 month low now. Several technicians are forecasting lower prices for gold, next week will tell the story.

 

The date of April 19 has a remarkable coincidence marking aggressive human acts.   Consider these events which occurred on that date.

 

• Start of American Revolutionary War
• Start of American Civil War
• Start of Spanish-American War
• Bay of Pigs Failure in Cuba
• End of Viet Nam War

 

 

 

And the date is living up to its reputation again. Consider these events this week.

 

• Release of Mueller Report, rather than accept it, Democrats now say it is up to Congress to ‘continue the investigation.
• Notre Dam Cathedral burns
• Tucson, AZ declares state of emergency unable to handle influx of illegals
• North Korea fires short range missile

 

 

America abandoned the gold standard April 19, 1933. So it was no coincidence that China picked April 19, 2016 to announce its own Shanghai Gold Fix.   China is now the largest producer and consumer of gold.

 

This is part of a much larger pattern of aggressive Chinese behavior. This of course is being ignored while our Congress works on the important things like demanding Trump’s tax returns.

 

China has adopted an aggressive Made in China 2025 plan for economic expansion. And there are at least three other initiatives at work.

 

First is the New Silk Road construction Project. This is a revival of the original 207 BCE Silk Road during the Han Dynasty. It will link China to East Africa, West Asia, and already Europe.   China already controls 10% of European water ports.

Next is the Asia Infrastructure Investment Bank. This is clearly a challenge to the World Bank and the International Bank for Reconstruction and Development begun at Bretton Woods in 1944. Significantly the US is not a member but most Asian nations are members with much of Europe on board.

 

Finally there is the construction on the Spratly Islands in the South China sea.

 

While American politicians cannot see beyond the 2020 elections, China has a long range plan which is clear to see, if only the USA would take a look.

 

13.5 Month Low in Gold Taking Hold

Tuesday April 16 2019

The cycle low of  13.5 months was due in March. That occurred but it apparently being re visited in April.

This Friday is April 19, an interesting date of considerable historic significance.

https://en.wikipedia.org/wiki/April_19

 

This marks the date of the start of the Revolutionary War and the US Civil War.

It looks like the XAU will make a secondary low this Friday.

The XAU dropped below its daily MAs yesterday which suggests weakness ahead.

Daily XAU

PMO looks likely to bottom this month.

Merger Mania

Weekend April  14 2019

Merger Fever Hits the Oil Patch

 

Anadarko stock rose 31% after Chevron offered $60.95 per share in stock and cash. The deal gives the second biggest U.S. energy company a boost in shale oil production as well as natural gas and offshore deep-water.

 

CNBC Nightly Business Report

 

This column has noted the laggard action of the second tier companies like Anadarko and Apache. That is now changing. Why is it happening now?

 

Positive social mood is inclusionary. Positive feelings about investing have led both the stock and energy markets higher. Mergers always happen in rising markets, often near the top or final rung of the ladder. A recent headline in the WSJ noted that investors were jumping into stocks for fear of ‘missing out’ on higher prices. That was not the headline last December 24 when the DJIA declined 600 points in one day.

 

Companies can catch the same I don’t want to miss out fever as well. This makes firms like Apache with its rich find in the Davis Mountains almost certainly in play.

 

In any industry is it always an individual that innovates. Henry Ford and Karl Benz were both inventing the internal combustion engine at the same time. Edison saw the future of electric generation Bill Gates saw the future of software when giants like IBM assumed all the money would be made in hardware.

 

Exxon and Chevron like IBM in the example, are late to the party. So it makes sense to buy oil in the ground from a known entity rather than start from scratch.

 

The DJIA is up about 250 points. That and merger mania has finally pushed the XLE Energy ETF over its 200 day moving average. Energy Service XES still badly lags only up one penny today and well below its 200 moving average, $12.04 versus $13.46.

 

An over supply of natural gas coupled with warmer weather has beaten prices down from $4.80 last December to $23.66. This has me wondering about the billion dollar LNG export projects underway in Corpus Christi. The Far East is not needing any more LNG at the moment.   But shares of Cheniere LNG are up 2% today to $68.47.

 

President Trump continues to be stymied in his attempts to build more pipelines. Environmentalists run to a sympathetic Judge to block attempts to complete these projects.

 

Here is our bottom line. Expect stock and energy prices to continue their upward trend into May. We speculated last week tech would lead and it is.   The seasonal tendency is for stocks to top and then slump during the summer. So far that expectation looks to hold true once again.

 

Stocks and OIl Higher into May

Weekend April 14 2019

The low risk entry was Dec 26 2018, The market is closing in on the seasonal highs that typically occur after tax day April 15.

This clearly shows the low risk entry was Dec 26 2018. Everyone is  on board now afraid of missing out on anny more gains.

I should have been more bullish when we had 600 new lows.

New Highs Versus New Lows

Higher new highs than last October.

Chevron's purchase of Anadarko puts lots of shale drillers in play. Best bet is a bet on all of them.

FRAK

This still has room to rise and stocks and oil are rising  together.  I also like Apache here.

Stock Market

An application of socionomics is that maximum mood occurs at the END of a move. That is demonstrated with the parabolic advance shown by the two blue arrows.  Markets are either at or approaching parabolic again, the big down move followed by an equally impressive up move. the steep rise now is probably no more sustainable than January  2018 or Sept 2018. But with maximum mood we can certainly head for a few more weeks into May.

Gold

The blue arrows indicate the 13.5 month lows in gold. This is a regular cycle. And given the low last August this looks like  a Wave 2 down concluding. This suggests higher prices ahead.

JNUG

JNUG has pulled  back to mid range.This ought to be a good spot to pick up some shares.

 

I like the gold sector which at least hit a new low, the overall stock market is not at a low risk entry now.

Social mood remains negative.  The Demplans for Mueller to de-rail Trump are not working well. By election day surely voters will have tired of the no cooperation on anything mood in Washington.

Caution Warranted Indeed

Wed April 9, 2019

Our column last Friday ended on literally a cautionary note.   Looks like we had that right.

 

Stocks and oil have followed one another up since last December. I expect we have at least the start of a consolidation in both markets. Gold hoever has been building a base around 1,300 since its February high at  1,375. Here is paper gold GLD which trades during the day.

Support has ben building here at  121. PMO is bottoming, this is forecasting a rally.

XOP

Energy shares may have topped at teh  125 day MA.

We have been anticipating a low in precious metals this month. It may be coming in earlier than we thought.