The 15-minute, ‘January Effect’

That’s All There Was

If we use the S&P as the proxy, it hardly even lasted that long.

Going back to just four days ago, we had this (emphasis added):

“It’s well known, stocks tend to rise in the first weeks of January. Tax loss selling is over and there’s typically some type of ‘relief’.

Don’t count on it this time (not advice, not a recommendation).”

Market Meets Expectations

It was expected on the first trading day of the year, the market would continue its downtrend.

After this morning’s 15-minute blip, that’s exactly what’s happening.

We’ve already discussed real estate IYR, (here, here and here) as well as the Q’s (here).

Now, there appears to be another sign of impending price collapse … the oil sector; specifically, Oil & Gas Index XOP.

As is typical, we’ll begin the analysis with the longer time frame, the weekly.

Oil & Gas Sector XOP, Weekly

There’s no secret to the chart below other than Livermore’s admonition for going short; that is, he finds a market that ‘goes down and stays down’ (not advice, not a recommendation).

The prior two down-drafts were quickly retraced; one in mid-July last year and one in September.

Not so, this time.

If we go to the daily, we have an ominous look where a downtrend could be validated.

Oil & Gas Sector XOP, Daily

The right-side trend is drawn as a dashed line, revealing the attempted breakout on the last two sessions in December.

Attempted trend line and channel breakouts are normal market behavior.

It’s clear in the case above, price action has quickly got itself back into the trading channel.


Of course, oil prices are not supposed to go down, right?

At this juncture, look at all the conflict and potential supply disruptions that are possible.

However, the price of oil and the price of the exploration/production equities are two separate things.

The price of oil could skyrocket further, and yet, the equites still collapse. Bear markets are all about price, wealth, and credit destruction.

Typical short positioning trade vehicles for this sector are DRIP (-2X) and DUG (-2X), or to short the XOP directly (not advice, not a recommendation).

Stay Tuned

Charts by StockCharts

Note:  Posts on this site are for education purposes only.  They provide one firm’s insight on the markets.  Not investment advice.  See additional disclaimer here.

The Danger Point®, trade mark: No. 6,505,279

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