The Bear is More Clever than the Bull

Monday April 20 2020

Note These charts were prepared mid morning Monday April 20

Richard Russell observed that the Bear was considerably more clever than the Bull.

https://en.wikipedia.org/wiki/Richard_Russell_(Dow_Theory)

The Bear wants to separate you from your money.  An example of the way the Bear does this is to hold up part of the market, now the Industrials,, while the other parts aree revealing their true hand. 

 

Transports - recall that Transports and Small caps lead the true market direction

The Transports peaked back on April 9, over a week ago Thursday.  The Industrials however enjoyed a 704 point rally this past Friday.

Industrials

Technicians often call this formation a broadening top. This inde also made a high April 9. Momentum via the PMO has fallen since. The one thrust up Friday to  24,200 was of course heralded as a new recovery high, which was true. But it was also probably the end of a 9 wave or five wave Elliott completion of a Wave 2  A B  C correction. Granted this correction has lasted longer than I expected but that is the nature of the Bear, he (she? EEOC among Bears here) wants you to be distracted.

S & P 600 Small Cap Index

Note the 50 bar Moving Average on the Transports and SML has already crossed over lower. Even the  200 bar is starting to lose velocity and flatten a bit.

This is how the Bear gets the masses to buy more when they should be selling.

Oil has led the markets up and then down. Today we have a complete rout in oil prices.

Arbitration is the market process of eliminating price differences in the same commodity trading in different markets.

We have reported that the cash oil market was in single digiits while futures were still at $2. We pegged support at 17 then 12 then 9. Well all that is gone today.

Crude Oil Dives 74% Today

I am frankly amazed the DJIA is not down 1,500 points but that is the nature of the Bear.

Comments

[Thomas Dresch]

With crude getting down to -$40 today. In your opinion, what does the future hold for the oil industry and how do these negative commodity prices work? Is the negative prices a way the market is trying to find equilibrium with the radical shifts in the demand.

[Dennis Elam]

Thomas
See my article today. The further out months are trading in positive territory but iit will take months to work off this excess. And who wants to sell inventory at a loss. Russia and Saudia Arabia thought they had things in hand, I wonder what they are thinking today.