DOW BACK TO RESISTANCE -- OPTIONS EXPIRATION BEHAVIOUR -- STOCKS CONTINUED THE DEFENSIVE POSTURE UNTIL TODAY -- ENERGY ENERGY ENERGY ENERGY -- $NATGAS SOARS ON INVENTORY DATA -- $WTIC TESTS RECENT HIGHS -- $BRENT BREAKS ABOVE A DOWN SLOPING TREND LINE
DOW BACK TO RESISTANCE... The Dow continued to move higher but stalled at resistance. This is our first test of resistance since the bounce. We have seen the $INDU become the strongest index which is not abnormal during a correction. We would like to see the $INDU break out to new highs next week to give a bullish bias towards month end. The charts below show the $INDU daily, weekly and monthly.
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Chart 1
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Chart 2
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Chart 3
OPTIONS EXPIRATION BEHAVIOUR... Chart 4 shows how the $COMPQ chart looked in 2011, the last downturn. Many of the market turns happened within a day or two of the equity options expiration. The $COMPQ is nowhere near resistance at the close of trading today. John showed the 60 minute chart of the $COMPQ yesterday and the countertrend bounce seems to be working higher, but it really needs another big 2% up day to get going. The VIX options expired yesterday and the equity options expired today. This is particularly important in down trending markets. How the market responds next week will be very important.
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Chart 4
STOCKS CONTINUED THE DEFENSIVE POSTURE UNTIL TODAY... With the bounce off the bottom, the same sectors seemed to be leading after this bounce. However, look at the complexion change from yesterday to today. Yesterday is shown in Chart 5. Note the date in the top left. This is where we will see if the correction is over or do we revert back to the defensive posture.
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Chart 5
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Chart 6
ENERGY ENERGY ENERGY ENERGY ... This week kept the same three sectors leading. The energy sector has rocketed higher since March 3. Russia invaded the Ukraine on March 1. The price of oil actually pulled back for a few weeks and then started to rise. The oil stocks have literally launched! Interestingly, back in 2011 the energy sector launched higher as well from March to May and topped out May 1. With coal, natural gas, oil, the land based drillers, frac(k)ing companies, LNG, shippers, refiners all breaking to the upside, the energy sector has a huge amount of momentum here. We have already discussed the coal stocks this week, as well as the drillers. Chart 7 shows the sector list for the last month and Chart 8 shows the upside breakout of the XLE.
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Chart 7
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Chart 8
$NATGAS SOARS ON INVENTORY DATA... I have been talking about Natural Gas related stories for a while now. Today, Natural Gas broke above resistance. It has made a higher high for a second week. This is an extremely bullish chart shown in Chart 9. On the weekly chart (Chart 10) we can see the big channel trend that is up.
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Chart 9
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Chart 10
$WTIC TESTS RECENT HIGHS... The $WTIC on Chart 11 is in a firm uptrend, but it is near resistance around $105. The SPURS indicator has broken out to the upside from going sideways for the last few months as shown on Chart 12. The green arrow shows the push above. I am very interested to see if the price can continue to move up. The huge resistance is at the $110 level.
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Chart 11
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Chart 12
$BRENT BREAKS ABOVE A DOWN SLOPING TREND LINE... Here is the zoom view I showed recently in Chart 13. It was falling below the 200 DMA. Now, it has quickly reversed. It is now above the downtrend line and the 40 WMA. We can see that if we extend the blue trend line up, it may cause resistance. With the $WTIC chart so bullish it is very important time for crude prices. Does crude stall here or does it break out? The SPURS (purple shaded area) is still not outperforming the $SPX on the $BRENT chart, but the company stocks are breaking higher which suggests this breaks out topside.
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Chart 13
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Chart 14
Have a nice long weekend. Chartwatchers newsletter will be out on the weekend. If you don't receive that newsletter, you can subscribe at the bottom of the homepage. Its free and it comes out twice per month.
Arthur will be back next week.
Good trading,
Greg Schnell, CMT.
