Looking For A Pullback To Make A Higher Low
Today the DOW closed up 74 points. At one point the DOW was down 10% for the year and now it is only down 3.5%. The DOW opened this year at 17823 and is currently trading at 17215. I believe the DOW will erase this 600 point loss and make a small gain by the end of the year. I do think there will be some pullbacks along the way. With around 50 business days left until the end of the year I am 100% certain that the low of 15379 will hold. Yesterday the market was quiet until one of the Federal Reserve board members said that the data shows the economy slowing. This was interpreted as the Federal Reserve saying that they would not raise interest rates, causing the market to rally over 200 points. By hinting at no interest rate hikes the Federal Reserve is able to help the market without quantitative easing. There will be two more Federal Reserve meetings before the end of the year, the November and the December meetings. As I have been stating since January, I do not believe the Federal Reserve will raise interest rates in 2015. They are going to do everything they can to get the market back up into positive territory by years end. The seasonally adjusted period of November and December is very bullish for the market.
Before yesterday’s 200 point rally there was a beautiful pattern setting up on the daily charts and I was looking for 1-3 more days of a pullback and for the stochastics to get oversold before a push back up. I am now waiting for a decline. On a pullback I would be looking to go long names such as Starbucks (SBUX), Home Depot (HD), and Disney (DIS). Going into 2016 there are many gaps below the market that will get filled.
Gold was significantly overbought. Gold hit a high of 1191 and then dropped down to around 1175 by the end of the day. I am waiting for a very oversold condition on the daily charts where I would look to enter a long position that should last 1-7 business days. I think stocks such as ABX (Barrick Gold), AUY (Yamana Gold), KGC (Kinross Gold), and NEM(Newmont Mining) will make higher low and there will be buying opportunities to capture the next move up in gold. If they do not raise interest rates gold can push up higher, however I am bearish on gold long term.
I am now looking at the December crude oil contract. Despite the large inventory number of over 7 million barrels oil has rallied. Oil on the daily charts has to hold above 45.44. Today oil got up into the mid-high 47 range and was up 75-80 cents on the day. I have a buy signal on oil on the weekly charts and I am looking for a pullback. The stochastics on oil on the daily charts are turning up. Prior to the inventory number oil was oversold. The number was bad and the market still turned up. Even if oil pushes up into the 48-50 range the market will have significant overhead resistance. I am currently on the sidelines waiting to see what happens with oil.