Indicators look a bit stretched, but we still see nothing that would suggest a major decline. Advisors should stick with their models and add money for new accounts. There are some good reasons for USO and UGA, and the oil markets in general, to rally at least until the end of July.
The tone continues to improve such that if stuff is hitting price points in your models it is ok to add. We would hold oil and oil stocks through the beginning of July.
Some indicators have improved. But we could still see some corrective action this week. Accumulation models still suggest adding to models on price weakness. GLD has broken down below the key 180 area. Friday it rallied to retest that area, now resistance, and failed to recover closing below it. This chart is now quite vulnerable.
The market has continued to broaden out in fits and starts, but still looks a bit overbought and we expect a pullback this week. SPY could test the 420 – area, where we would consider adding some money. Below that would imply a test of 412. QQQ could test 338, then 326. Because of the seasonality, we advise selling CORN and SOYB this week.
We continue to recommend being invested in models and will look to deploy trading cash on a pullback, which we think is close – probably after this holiday weekend. We expect the market to broaden out in favor of sectors like Energy.
SPY has broken through the bottom end of resistance at 420, and is testing the 430-area, also part of this resistance zone. The daily and weekly stochastics are both overbought. Support is 420, and if this breaks, we could see a hard-down move.
Stocks may see some more choppiness and correction but should continue to broaden out even on declines. GLD is holding the 180-area, and while we are not optimistic, it is holding so we cannot count it out. The main thing there is that there is little accumulation, and a break of 180 would be a concern. USO has slowly moved down into buy territory from a peak in 2022.
All that has happened so far this year, aside from the banking crisis, is an oversold bounce in some large cap Technology names that has pushed up MGK – which is still more than 10% below all-time highs. Friday’s action was good and a sign that this may be starting, as various sectors and indexes outperformed SPY and QQQ.
SPY rallied to the top end of the trading range at 420. But virtually no other indexes followed, raising questions about Breadth. SOYB has support at 24, and resistance in layers from 26 to 29. The daily and weekly stochastics are both oversold. This suggests a seasonal rally is possible, off of this support.
Stocks should move down toward the bottom of the range in spite of seasonal strength into the Memorial Day weekend. We continue to hold stocks in our models but will not chase a move up.
Our internal indicators did not show the kind of improvement we would expect. MUB should hold 105, as this is the strongest of these charts due to the higher right shoulder. A break of that area would suggest higher rates, which would be a surprise. We have discussed the possibility of a seasonal bottom in oil prices at the end of May, and we are now very close to that timeframe.
We see the SPY trading to the 380-area by the end of May or so, where we would buy the market, with the trading cash we took out in the 414-area. While indicators suggest this range will resolve to the upside, it probably won’t do so at this time.
We maintain our forecast of a move down to the bottom end of our projected trading range (380 or so to 420 or so on SPY). While Anecdotal Sentiment is quite bearish, our Real Sentiment Indicators do not reflect this.
Indicators continued to weaken on Monday and Tuesday, suggesting a bit more pullback for the stock indexes. Bonds were hit a bit but still remain close to the middle of their trading range. This is probably a good time to buy Japan with a longer-term horizon.
We would expect this week to be down, but please recall, that our forecast top of the range is 420 to 440 – it is possible that we break above 420 and if SPY fails there it should move quickly to the bottom end of the range. Small cap generally outperforms coming out of a recession, so the action here suggests we may be going into recession, and not in recession now.
More of a correction would be confirmed by a move below 407, on SPY, very close to Tuesday’s low. Then a break of 400 would target 380 or so. We note the McClellan Oscillator, at -95 or so, and stochastics plus other indicators, suggests more downside potential here. Relax, as we should have a good buying opportunity over the next few weeks.
We still remain cautious on the market, and expect to continue within the trading range. We would be accumulating oil stocks on dips over the next few weeks.
So far, we have seen some tech earnings that have been better than expected, so stocks could bounce early Wednesday on this news. If the market fails to rally nicely on this news, then it would tend to confirm our view that the next pullback is underway. For GLD, failure to exceed 187 on this move would be a concern, and below 184 would suggest lower prices are coming.
There are signs of a short-term top in the market. We still do not see a move to 300 on SPY, however, and will take trading positions on any buy signal around 380 or so.
