The FRED Report
Financial Research, Education & Data
The FRED Report is not authorized, endorsed or affiliated with the Federal Reserve of St Louis and its FRED Economic Data
USO may have made a seasonal bottom in October, and if so it could go sideways, or rally into November. Oil could rally on this weekly stochastics recycle. We maintain our $72/Bbl target on oil, the equivalent price on USO is around 15 to 16. This will most likely happen this winter, if oil makes higher lows now.
SPY has retested the top end of our 294 to 302 range and sold off. Traders sold positions, but we maintained investment positions, adding to them in the 285-area. Now this could be a bottoming pattern, with daily stochastic buy recycle underway.
MDY has a new weekly stochastic buy signal, and this may be giving us a new short-term buy signal for the market as a whole. MDY has become a short-term trading range, and a new high after this pullback would be strong.
Commodities, especially oil, have topping signs, and are starting to pull back. The summer driving rally may be over. Our favorite broad-based Commodity Index ETF, DBC, is declining with oil. Targets are 15 or so on DBC. Watch Oil via USO and DBC carefully. These suggest the rally in the oil stocks is ending. We may not see much in oil and oil stocks until the fall.
As of now, we are prepared for another decline that might be steeper than many researchers are expecting, at the end of this summer rally phase. Accumulation models are not leading in this advance, a concern. They are very weak on QQQ and Tech. International is less attractive than the U.S., but could be stronger in the second half.
There is a failed daily stochastic recycle for SPY, and now the weekly could turn up as well. This pull back could be setting up a summer rally, but there are crosscurrents and we expect a test of 270 or slightly lower, before this. A break of 265 would concern us and could set up a test of the December 2018 low.
We are overweight XLF, and XLV. These still have strong accumulation models. We are underweight XLE and IYZ, which hit downside targets for 2018 but remains an underperformer. XLP is a range. XLRE has strong accumulation models and broke out to the upside – we are an Equal Weight.
Our favorite broad-based Commodity Index ETF, DBC, has rallied into the first quarter of 2019. Targets are 18. Watch Oil via USO and DBC carefully. These could suggest a rally in the oil stocks. There are short-term bottoms in place on oil and DBC, but we are entering a period of seasonal weakness on oil – consolidation is possible.
SPY is rallying in the first part of 2019, per our yearly forecast, and indicators are short-term overbought. The rally has been very strong in terms of breadth, a plus, but weekly indicators are still in downtrends despite the breadth surge readings on the daily indicators.
The market resolved the oversold conditions on this rally. As of now, we are prepared for another decline that should complete a bottoming formation – but advisors have some good investments at attractive prices.
The drop was more extensive than expected, although our target of 240 held. The market is oversold to rally but the quality of this is important. As of now, we would look for another decline that should complete a bottoming formation.
Commodities, especially oil, have been much weaker than we expected. GLD has been weaker than expected but has rallied off support.
SPY has rallied to the 290 area, and the divergences led to a sharp drop as forecast. Now, if there is strong breadth for the next few weeks the market could be setting up for a strong beginning to 2019. Otherwise, another drop at the beginning to 2019 is possible.
New Highs/New Lows has rolled over again, and is now negative: It fell off as the market corrected in February, after beginning to weaken before the correction started. Remember that this is a leading indicator that often goes negative first. Now, there has been four weeks of more new lows than highs, suggesting a corrective period could occur.
SPY has rallied to the 290 area, and there are divergences. The market is still set up for a fall correction. The danger is this new high is reversed. Note that RSP has not made new highs (we talk about indexing in the research piece), a sign the market is narrowing. Breadth indicators suggest this as well. For an example of how a false breakout could look, check out the weekly chart of XLP.
SPY and other indexes are rallying but we are not sure if this will last beyond a token new high. The market is still set up for a fall correction.
We still expect more rally in July, but the danger is a new high that is reversed. For an example of how that would look, check out the weekly chart of XLP.
Commodities have built a long-term base, and these could be strong in 2018. GLD is consolidating and it is back in our models as a buy. It could test the133 level. Industrial metals (DBB) have pulled back, but from high levels. Oil seasonal weakness may be over – the seasonal bottom is the May/June time period, but it has hit our targets and could consolidate.
Oil seasonal weakness may be over – the seasonal bottom is the May/June time period. Our favorite broad-based Commodity Index ETF, DBC, is at 17.50, our first target, along with oil. Targets are 22 if this can stay above 17.50. Watch oil and DBC carefully –Oil has signs of a seasonal bottom, and it is May/June when this occurs.
The Put/Call indicator is now very positive as it is in areas marking major bottoms. We rate sentiment neutral here because the intermediate sentiment indicator remains in sell mode, although Put/Call has given strong buy indications.
Click Hereand enter PromoCode '30Day'for Free Trial
Who is Fred Meissner, CMT?Listen here: