This is going to be brief and to the point, if you'd like to read more about why the market is doing what it's doing, read my daily posts from the last few days. Here is yesterday
The market is gracefully trading up to that estimated 2020 flat spot as easily as it is to predict that a bite of Captain Crunch will scratch the roof of your mouth. We saw it a month ago and now the big question is... well two questions. What's next? And secondly, how do I even trade this?
Is this the next "big short?" That once in a decade trade that you kick yourself for not entering? Or is this the recipe for some miracle bull market to come out of something something Fed. I personally am betting on the former, an 18 month drift down that starts in two weeks and ends in two Augusts. Why in August? Because that's when crashes happen to exhaust bear markets, and two years sounds pretty good to me. Things aren't that bad, even though they are bad--at least not 1929 and 2008 bad. They are more like a less severe 2000 bad.
SPX
It was a sort of flat low volume drift up-ish, just like the scribble chart shows. It's a flattening of the market near a key resistance point, 2020 being the estimated top of it. SPX Zoomed in to show a likely volatile "flat spot" which could bounce around between here and the 2040 at the very top. I would expect this to sort of not be changing too much until the days approaching Fed day.
Oil
Click the chart of the OVX to see what this is going to look like if oil continues to trade up to this flat spot as well. CL zoomed in shows where the likely flat spot will top out to coincide with the SPX, and as long as nothing changes OPEC wise, like production cuts, Oil will be victim to whatever direction the Fed decides to drive the economy, 3/16/2016. Well say your prayers and hold up your Yellen 3:16 signs, because they are likely to be the major catalyst to send this market quickly into one direction or the other. I'm still in the 80% chance it's going down camp, but that's my trade. And like any other trader I can be dead wrong. So I also have my exit strategy for being wrong.
Oil future trading in a bear market scenario
As a bonus here is another scribble chart to go with the SPX one. CL's Scribble Chart. This isn't as much as a prediction like the last one because oil is very hard to predict. One sentence from an OPEC leader, or news about a war is about 10x as anything Yellen can do for the overall market. So this chart is just a guide for a bear market in light of no earth shattering resolution in the glut problem. If there is a bear market, 2016 will continue to be nasty for oil, a nastily flat cycling nowhere zone of this 30-40's range that will likely flatten May-July which is a historical seasonal topping off in a bear market. Falls in oil like to happen in August, so look for things to get nasty again like they did last August. But really, just watch the bonds market and the equities markets, these will be what drives oil's major fundamental moves if nothing changes OPEC. Mostly because they will be representations of the demand for oil based products. So at a fixed, gluttonous supply lower market will mean lower demand for products, so there could very well be a strong correlation between oil and the SPX for almost all of 2016 if there is a bear market. And on the oil front, OPEC could literally change all this in a heartbeat, so we will reassess this if news comes out to change it at any point in 2016. But be wary of this rally, if the SPX starts to fall at the 2020 range, it's hard to see any reason for oil to not fall with it.
So if you are long, it might be wise to start planning your exit to cash. If you don't know, don't trade. When in doubt just stay out. If you want to short, plan a stop for the off-case there is a rally beyond 2100, and then at point examine if it's justified and just do what you've been doing since 2009: buy the dips. But in my opinion, and it's just an opinion, it's all going down down down...
Happy Thursday, happy trading, and happy...birthday? If it's your birthday, then this post was for you.
Submitted March 03, 2016 at 10:30PM by gabriel87120 http://ift.tt/1Y8po3e
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