DBC, Commodity ETF, is now in defined range with bearish bias prevailing. I like most commodity ETF stocks for possible short trade. Only one – agricultural commodity ETF – is bullish for me. Technical analysis now agree with my Global Macro opinion about commodities.
I wrote into my commentary for today’s ETF & Stock Trading newsletter :
“There is shortened trading week. Tomorrow is no trading in USA. But situation is still very bullish. Stock markets do not want to make any pullback. Such healthy pullback should offer good opportunities for new long trades.
I do not feel comfortable with opening new longs now.
Still the situation is not good for new shorts. Stock market bias is pushing weak stocks higher. It means that stop loss orders are easily triggered. I am now ready to open short trades with smaller size preferably.”
So I have found that E is relatively weak stock . I have trade setup for short trade in this stock
SP500 index lost all gains from previous 5 weeks during last selloff . It is not bullish sign. Some correction is in front of us. Index can easily drop to 1000 pt level. It is time to be cautions and think also about short sell trades.
Stock market rally from last days is accompanied by very low volume levels. As you may know, volume is important indicator for me. And so I do not know now if stock market will make new breakout again.
I have noticed that during last month everything were strongly corellated . Currencies vs Stock markets vs commodities. All moves the same direction. Main driver was only Risk On or Risk Off mentality.
It was also in sectors on stock markets as every sector moved up without significant pullbacks or presentation of relative strength or weakness.
But finally I have noticed first signs of divergences. You probably seen strong rally in gold and silver but without significant decline in USD
Also Oil started to correct.
And finally some parts of stock markets looks differently then others.
I would like to point you to Rusell 2000 index (small caps). It starts to show relative weakness to SP500 or Nasdaq indexes. I will watch it more for possible short trade with IWM ETF. Traders could also use inverse ETF with ticker TWM.
There is very strong divergence in price development between crude and other commodity- natural gas. Oil (but also several other commodities) is in bullish uptrend, natural gas price is in strong decline.
What is wrong ? Price of oil or price of natural gas ? Maybe we can see good tradable global macro theme developing righ in front of us.
I was not trading too much last week as this rally left me practically without open trades on stock market. I closed 2 longs and still I have opened one short (KR), but I am still in process of waiting for stock market pullback.
10 days of strong rally without pullback did not allowed me to enter trade with good risk reward ratio.
I have watched gold chart and found interesting that on long term chart one can find both types of trading idea:
a) bullish: represented by inverse head and shoulders pattern
b) bearish: represented by double (tripple) top chart pattern
What will prevail? Right now it is looking technically more bullish but based on my global macro themes I am not very bullish on gold fundamentally long term.
Yo can see declining volume since beginning of May on US stock markets. There are not real buyers on US stock markets since then.
I think that all move from beginning of May (near 930 high) is in risk. If we will not see some upmove with strong volume, then stock market can easily drop below 900 level – 800 to 820 as target.
Broad market index SP500 is trading in very tight range in last few days. And also volume totally collapsed.
SPX is pushed down by resistance level near 940 – 950 level . But there is also uptrend line supporting price in rise. Also 200SMA and 20MA are near current price level. I expect that we will see stronger move soon, up or down. Till breakout or breakdown I do not want to make a lot of aggressive trades.
My swing trading strategy has now prepared stock trade setup for relative strong or relative weak stocks only.
