Waiting for Clearer Patterns in All Markets

I am currently on the sidelines in the U.S. equity markets.

I had stated that “If the Dow Jones Industrial Average gets into the 16,850-17,400 range I would be looking to short the exchange traded funds which mirror the U.S. equity markets. I would also look to sell any stocks, mutual funds, and/or exchange traded funds one may own if the Dow Jones Industrial Average rallies into this range as I believe the gaps below will get filled.” At today’s high of 16,726.12 the Dow Jones Industrial was less than 130 points away from entering this range. Currently I would no longer be looking to short the exchange traded funds which mirror the U.S. equity markets or be looking to sell any stocks, mutual funds, and/or exchange traded funds one may own if the Dow Jones Industrial Average gets into the 16,850-17,400 range.

The U.S. equity markets are starting to get somewhat overbought on the weekly charts. I am waiting for the U.S. equity markets to get to an extreme oversold or an extreme overbought condition. At an extreme oversold condition I would be looking to buy the exchange traded funds which mirror the U.S. equity markets and at an extreme overbought condition I would be looking to short the exchange traded funds which mirror the U.S. equity markets. These exchange traded funds include DIA (mirrors Dow Jones Industrial Average), QQQ (mirrors NASDAQ Composite), SPY (mirrors S&P 500), and IWM (mirrors Russell-2000).

There are now only two gaps below on the daily chart for the exchange traded fund SPY. These gaps go down to the 182.86 level, equivalent to the 15,500 level on the Dow Jones Industrial Average. I believe these gaps will get filled sometime in the next 10-12 weeks. On January 8th I got a sell signal on the weekly charts for the U.S. equity markets when the S&P 500 futures closed below the 1,956 level. If the S&P 500 futures close below the 1,858 level on the daily chart I will get a sell signal on the daily charts to mirror the sell signal on the weekly charts. If I get this sell signal on the daily chart I would be looking to short the next bounce with the expectation that we will see new lows for 2016.

We saw a rally this morning in the U.S. equity markets with the Dow Jones Industrial Average trading up to a high of 16,726.12. By late morning the U.S. equity markets started coming off the highs. At around 2:45 I got an intraday sell signal on the U.S. equity markets. The Dow Jones Industrial Average closed down 123.47 (0.74%) at 16,516.50, the NASDAQ Composite closed down 32.52 (0.71%) at 4,557.95, the S&P 500 closed down 15.82 (0.81%) at 1,932.23, and the Russell-2000 closed down 3.28 (0.32%) at 1,033.90.

Follow Steve on Twitter at @stevekalayjian

Crude Oil

I am currently on the sidelines in crude oil.

There are plans for a meeting in mid-March between OPEC and non-OPEC members to discuss the possibility of a freeze in crude oil production. There is currently a significant supply of crude oil and a freeze would not mean much as production is currently at very high levels. Crude oil has a ton of overhead resistance in the 34-38 range.

The low in crude oil for 2016 is 26.05. I am waiting for a significant pushdown in crude oil to new lows in the 18-22 range. If crude oil pushes down into this range I would then be looking to buy crude oil and oil stocks. If crude oil prices drop into this range I believe there is a very high probability OPEC will decide to cut production by 5-10% and we will see an intermediate term bottom.

Crude oil was up 1.14 (3.47%) today, closing at 33.98.

Follow Steve on Twitter at @stevekalayjian

Gold

I am currently on the sidelines in gold.

I have been looking for a pullback in gold on the daily chart. On February 16th gold traded down to the 1,191.50 level. Gold has started to consolidate and I do believe gold will trade up into the 1,280-1,300 range in the next couple weeks. If gold does pullback in to the 1,165-1,185 I believe that would be a range to start building a position in gold and the gold stocks. The gold stocks I am looking at include ABX (Barrick Gold), NEM (Newmont Mining), GLD (Gold ETF), KGC (Kinross Gold), and AUY (Yamana Gold).

Gold was up 19 (1.55%) today, closing at 1,241.80.

Follow Steve on Twitter at @stevekalayjian

Please see the Steve Kalayjian’s The Kalayjian Report and Newsletter Disclaimers and Disclosures

About The Author