Crude Oil Rumor Pushes Up U.S. Equity Markets

U.S. Equity Markets

If the Dow Jones Industrial Average pulls into the 17,050-17,350 range, getting to an oversold condition on the daily charts, I would be looking to buy the exchange traded funds which mirror the U.S. equity markets for a trade only. The exchange traded funds which mirror the U.S. equity markets include DIA (Dow Jones Industrial Average), QQQ (NASDAQ Composite), SPY (S&P 500), and IWM (Russell 2000).

I expect the U.S. equity markets to stay within a tradable range for the next couple weeks. Long term I am not bullish the U.S. equity markets. There are four gaps below the market down to the 15,500 level on the Dow Jones Industrial Average. I believe these gaps will get filled sometime in 2016. The U.S. equity markets are running into significant overhead resistance. The Dow Jones Industrial Average is in the 17,400-17,900 range where I stated that if I was a long term investor I would be looking to sell any long positions in equities, mutual funds, and/or exchange traded funds. If the Dow Jones Industrial Average pushes up through this range I would be potentially be looking to short the U.S. equity markets.

Earnings season for 2016 Q1 began last night with AA (Alcoa) releasing their earnings. Alcoa reported greater than expected earnings per share however they had a decline in profits of 92%, weaker than expected revenue, and sales were down 15% from the prior year. In addition Alcoa lowered its 2016 outlook and said they could cut up to 2,000 jobs in preparation of the companies’ split.

This morning the International Monetary Fund (IMF) cut global growth expectations for 2016 from 3.4% to 3.2%. The U.S. equity markets opened strongly this morning before starting to selloff around 9:45am. At around 10:30am a rumor was released that Russia and Saudi Arabia had agreed to a crude oil production freeze. Crude oil exploded in response to this rumor, carrying the U.S. equity markets up with it. The Dow Jones Industrial Average closed up 164.84 (0.94%) at 17,721.25, the NASDAQ Composite closed up 38.69 (0.80%) at 4,872.09, the S&P 500 closed up 19.73 (0.97%) at 2,061.72, and the Russell 2000 closed up 11.37 (1.04%) at 1,105.71.

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Kalayjian Signals

BMY (Bristol-Myers Squibb Company): Buy Signal on Daily Chart (04/05/16)
Entries: 65.00, 64.04, 63.08
Stop: 61.73
Status: No Fills

TBT (Bristol-Myers Squibb Company): Sell Signal on Daily Chart (04/06/16)
Entries: 36.35 (filled), 36.89, 37.44
Stop: 61.73
Status: Short at 36.35

NEM (Newmont Mining Corporation): Buy Signal on Daily Chart (04/07/16)
Entries: 27.10, 26.45, 25.80
Stop: 24.89
Status: No Fills

LLY (Eli Lilly and Company): Buy Signal on Daily Chart (04/07/16)
Entries: 73.56 (filled), 72.36, 71.16
Stop: 69.50
Status: Sold at 74.20 (+0.64)

NVAX (Novavax, Inc.): Buy Signal on Daily Chart (04/07/16)
Entries: 5.39, 5.10, 4.81
Stop: 4.41
Status: No Fills

CELG (Celgene Corporation): Buy Signal on Daily Chart (04/07/16)
Entries: 105.96 (filled), 103.63, 101.31
Stop: 98.06
Status: Sold at 106.52 (+0.56)

MDLZ (Mondelez International, Inc.): Buy Signal on Daily Chart (04/07/16)
Entries: 41.26, 40.65, 40.05
Stop: 39.21
Status: No Fills

GFI (Gold Fields Ltd.): Buy Signal on Daily Chart (04/11/16)
Entries: 4.01, 3.85, 3.70
Stop: 3.49
Status: No Fills

ABX (Barrick Gold Corporation): Buy Signal on Daily Chart (04/11/16)
Entries: 14.80, 14.42, 14.06
Stop: 13.53
Status: No Fills

SLV (iShares Silver Trust ETF): Buy Signal on Daily Chart (04/12/16)
Entries: 14.96, 14.78, 14.61
Stop: 14.37
Status: No Fills

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Crude Oil

I have a buy signal on both the daily and weekly charts for crude oil. There is a beautiful pattern setting up on the weekly chart, similar to the recent pattern on the weekly chart for gold. I would be looking to buy crude oil in the 31-36 range using a 29 stop. I would also be looking to buy oil stocks if crude oil pulls into this range for a trade only. I expect this pullback to occur sometime in the next 4-8 business days. Long term I am still bearish crude oil. I expect crude oil to run into a wall in the 45-50 range if it even gets up to those levels.

At around 10:30am this morning a rumor was released that Saudi Arabia and Russia had agreed on a production freeze. Crude oil exploded to the upside in response to this rumor. Around 15 major oil producers including both OPEC and non-OPEC producers are expected to attend a meeting in Doha on April 17th. Even if a production freeze was agreed upon it would be irrelevant as production is currently near capacity. Crude oil inventories are at a record high (over one billion barrels worldwide) and are increasing further with production continuing to outpace demand.

At 4:30pm the American Petroleum Institute (API) report showed an increase in crude oil inventories by 6.2 million barrels from the prior week, much higher than the expected increase of 1.9 million barrels. Crude oil dropped sharply following the release of this report.

Crude oil was up 1.28 (3.17%) today, closing at 41.64.

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Gold

If gold pulls into the 1,190-1,220 range using a 1,170 stop I would be looking to buy gold and the gold stocks. On the daily chart for the gold stocks I am looking for a pullback to a higher low in anticipation of a push back up. I expect this pullback to occur sometime in the next 4-8 business days. The gold stocks I am looking at include ABX (Barrick Gold), AUY (Yamana Gold), GDX (Gold Miners ETF), GG (Goldcorp), KGC (Kinross Gold), NEM (Newmont Mining) and SLV (Silver ETF). I currently have Kalayjian Buy Signals for NEM, GFI (Gold Fields), ABX, and SLV. (See Kalayjian Signals)

I had been stating that there was a beautiful pattern setting on the weekly chart for Gold. In the week ending April 1st gold traded down to a low of 1207.70; however it never entered my range. Gold has now rallied over 50 points from that low.

Gold was down 2.40 (0.19%) today, closing at 1257.40.

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