We’ve gone form “Not Happening” to this morning’s action; ‘maybe it’s happening?’
As was done with Oil & Gas exploration XOP, we’ll now take a look at the oil patch itself and proxy, USO.
Oil tracking Fund, USO, Close
“What do you see?”
Marking up the chart.
We either have the ‘tradable bounce‘, or a potential contact point for the right-side channel line (not advice, not a recommendation).
The Fed announcement is just out, essentially accommodating a rate cut in September.
There was talk of some ‘cooling’ in the market (Ya think?).
With that, demand for oil seems like it would take a hit putting it lightly (not advice, not a recommendation).
Positioning.
The market itself is telling us where to go and what to do.
The important item for the day; what is the market not doing? Specifically, the Semiconductors, SOXX.
The SOXX, has not made a new (daily) high (at least, not yet) after the Fed’s announcement; it can even be seen as the ‘proverbial gut-check’, a la David Weis.
With that, all other positions have been closed save the short in the semiconductors via inverse fund SOXS (not advice, not a recommendation).
Danger Ahead
The ‘rate cut’ has yet to happen and September is a long way away.
It can’t be re-iterated enough how dangerous is this environment; prices stretched via a narrative that’s false (not advice, not a recommendation).
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.
Weren’t we supposed be forming some kind of ‘tradable bottom’ because the sellers were accumulating?
That kind of bottom-think may have worked under more ‘normal’ conditions.
However, it should be obvious to all (with some still clueless), we’re not in normal conditions.
Hedge funds dumping oil, giving a heads-up, demand collapse is either coming or is already here.
Great Depression 2.0
Presented many times on this site (click sidebar ‘Great Depression 2.0’, for a list of posts) that we’ve likely gone straight past ‘recession’, into depression (not advice, not a recommendation).
If that’s even remotely true, we should see demand collapse in heavy duty areas of the economy like trucking, right along with job implosions.
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.
That’s hardly the hundred years or so, one would infer without digging deeper.
The Bond Model
Let’s not forget, bonds had a similar ‘maximum short‘ condition back in 2020.
Back then (like now), the ‘max-short’ was supposed to result in some kind of history making squeeze.
The result? It never happened.
Instead, bonds collapsed, rates launched higher and here we are today.
With that, let’s look at oil proxy, USO.
U.S. Oil Fund, USO, Daily
As of today’s action, it’s not looking too good for the bulls (not advice, not a recommendation).
It’s somewhat self-explanatory.
Price action is in Wyckoff ‘up-thrust’ position and with today’s reversal, appears to be confirming (not advice, not a recommendation).
As the earlier post stated, I’m already short the sector, DRIP-24-01, with a definitive stop defined as yesterday’s XOP high (not advice, not a recommendation).
If the ‘max short’ for oil really is the pre-cursor to an upward squeeze, we may be about to find out very soon.
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.
‘ … we’re at the 161.8%, projection and USO is hesitating; at the same time, Nat-gas, UNG, appears to be forming a long-term bottom’
The implication was: We’re at a Fibonacci level in USO, while the ‘herd’ has positioned themselves (massively) long and Nat-Gas appears to be reaching a (potential) long-term low.
Three trading days later, we have this:
Oil Tracking Fund USO, Weekly
If you look closely, the grey dashed line, the Fibonacci 161.8% projection, is just visible and extends out of the green line, highlighting that level.
A possible, nascent reversal.
Way back in 1902, after studying the markets intently, Wyckoff, discovered the following (paraphrasing):
‘Forces were at work, moving prices around, independent of any fundamentals, not connected to any valuations.’
Nearly, a century later, Prechter says this as well in one of his many interviews (paraphrasing, again).
‘If somehow, I was able to give you the newspaper headlines for tomorrow, you would not be able to tell me if the market was going to go up or down’.
The media is presenting oil (gasoline) and Nat-Gas prices as inversely correlated. Looking at the topping chart of USO and the bottoming chart of UNG, it’s believable … for now.
Downward thrust in Nat-Gas UNG, appears to be exhausting itself after a 20-month, bear market.
Risk is never zero, but currently appears to be at a low for UNG (not advice, not a recommendation).
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.
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.
Storage facilities in Texas are paying to have someone take excess Nat-gas.
As this link says, the ‘reason’ for negative Nat-gas, is high oil prices prompt drillers to increase oil production, along with (by-product) Nat-gas, driving down the price.
We’ll cover Nat-gas (UNG) in a separate update which by the way, on Friday, posted another Wyckoff spring set-up.
The question du jour is, ‘does oil go higher from here?‘
If oil is going higher (or likely to go), then Nat-gas may be pressured downward for longer.
International Chaos
The amount of ‘pontificating’ from the media on what oil is, or is not going to do, is mind-numbing.
Wyckoff himself said, we’re attempting to find out ‘the next probable direction’ for the market, which of course, can never be known for sure.
With that, let’s go to the truth of the matter, the chart.
Oil Tracking Fund, USO, Weekly
Shown on the chart, is a Fibonacci projection from the lows of March 2023, to the first wave high of April ’23, then back down to the wave low, in May ’23.
It might be hard to see, so the first waves are highlighted with green dashed lines.
At this point, instead of asking the question ‘where’s oil going?’, a better question may be, ‘is the chart of USO “respecting” the Fibonacci projections?’
Looking at the chart, it’s an obvious, yes.
Right now, we’re at the 161.8%, projection and USO is hesitating; at the same time, Nat-gas, UNG, appears to be forming a long-term bottom (not advice, not a recommendation).
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.
“What we’re looking for here, is some kind of Jimmy Carter type stunt where corn exports are halted in the name of ‘national security’ or some such thing.”
Corn Tracking Fund CORN, Weekly
Two Fibonacci projections are overlaid on the chart.
First, a simple retrace starting near ‘Derecho’ lows, to highs set during the week of April 29th, 2022.
Second, a counter-trend projection from those highs to the intermediate lows set during week of May 19th, 2023 and highs of June 23rd, week, the same year.
CORN has retraced 61.8%, which is also the 1:1 counter-trend projection. In addition, it’s the measured move from the wedge break.
The market has effectively confirmed the support area.
Oil Goes Negative … And Corn?
Remember that ‘anything can happen’. Oil futures made history by going negative.
We’re in a new construct, a new paradigm, our strategy should match accordingly.
Everyone has their own perspective and plan for the markets; fair enough.
From here, CORN could continue to new, all-time highs.
However, for my accounts, I’ll wait until such time it appears the downside risk is removed as much as possible.
One potential area for that ‘removal’ is the 76.4%, retrace in the vicinity of CORN @ 16 (not advice, not a recommendation).
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.
Monday was Fibonacci ‘Day 13’ from the January 4th, XOP, lows.
With about fifteen-minutes before the open, pre-market action in the XOP leveraged inverse fund DRIP, is trading slightly higher at 12.67.
So, was yesterday the day? Has XOP topped-out and now in the process of reversal?
As always with the markets, the price action itself, will show us the truth.
However, what can be stated with some confidence, is that we’re at a low-risk point for going short (not advice, not a recommendation).
‘Low-risk’, does NOT mean ‘no-risk’
XOP, New Low or New High
It’s somewhat straightforward at this point.
If XOP, posts a new daily low, it increases the probability of reversal. If it posts a new daily high, then price action is possibly on to new all-time highs.
Oil & Gas XOP, Daily Close
The daily chart shows the labored six weeks of rounded top that’s identified as ‘Up-Thrust’.
At present, XOP is testing the underside of that Up-Thrust.
The zoom version of the chart shows the amount of upside effort expended during the rounded top.
Price action spent over a month attempting to move higher, only to collapse into a downside reversal.
Now, we can see that wide price action area is being tested; not unlike the Newmont test as described here.
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.
When Oil & Gas Sector XOP, pushed above last week’s high, it negated the breakdown scenario.
At the same time, it opened another potential opportunity that may set-up this coming Friday … The 13th.
We’ve shown over and again, markets tend to exhibit repeating patterns. Things like trading ranges, terminating wedges, breakouts and breakdowns, are not new.
However, there’s a lesser-known characteristic; the tendency for a market to go straight from a Wyckoff ‘spring’, into an ‘up-thrust’.
Currently, we’re about mid-way into the set-up as shown on the daily chart of XOP.
Oil & Gas XOP, Daily
Price action pushed below support (the spring set-up) and is now mid-way into that spring; potentially going straight into an up-thrust.
There was a reversal pivot on Fibonacci Day 5 (yesterday), which opens up the possibility of another time correlation at Fibonacci Day 8 … this coming Friday.
Before The Open
It’s about twenty-minutes before the regular open and XOP, is trading higher … further confirming we’re headed for a potential set-up and reversal (not advice, not a recommendation).
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.
Since the lows last November, to the close this past Friday, gold (GLD) has moved higher by a decent but modest 15.4%.
Naturally, the opportunists are out telling us ‘We’ve been warned’, ‘this is it’, ‘it’s going to the moon’ … yet again.
With that backdrop, we’re going to look at the precious metals facts, not the hype.
‘Precious metals’ because there are only four that have ‘currency code’ classifications, i.e., are classified as an asset with ‘currency like’ monetary characteristics.
Way back over a century ago, Wyckoff discovered the key to understanding the next likely move of the markets was the study the market itself (not fundamentals).
Wyckoff essentially ‘locked himself in a room with just a stock ticker and phone line’.
That’s not saying ‘money printing’ has no effect. There are a lot of moving parts. Intentional destruction of the food supply is just one of those parts.
Old School Analysis
Hypothetically, if you dropped an ‘old-timer’ into the markets at this juncture (without him knowing the ‘hype’), and showed him all four charts of gold, silver, palladium, platinum, and asked ‘what’s happening?’
What’s his response?
After a brief look at the charts, he would likely say:
‘Gold’s move higher is not being confirmed by the other precious metals’.
Note that all four metals peaked together during the inflation spike of 1980.
Ergo: At this juncture, something’s wrong.
Either the other metals are going to ‘catch up’ to meet gold or gold is going to come down to meet the others.
That is of course, unless this time is different … somehow.
With that, we’ll look at the chart of gold to see what it’s saying about itself.
Gold GLD, Weekly
We’re starting with the unmarked chart.
Note: Elder’s Force Index scale is expanded to show the nuances of GLD, price action.
Next, we see we’re at a test of the trendline in place for 16-months before the downside breakout of July, last year.
Moving in closer, we have a wedge formation prior to the up-move last week.
Is this a breakout to the upside or a throw-over?
At this point, it’s unknown.
We can see that Force Index is below where price action entered the wedge during the week of November 11th.
Less force up into resistance (trendline), paints a slightly more bearish than bullish picture.
The ‘Why’ Comes Out
As if on cue and in classic Wyckoff style, we have a ‘why‘ for the move off the lows of last November.
Classic Wyckoff, because he said the ‘why’ of a move comes out after the fact.
There you have it; China buying gold last November and December.
During this move from the recent lows, it was certainly a trading opportunity for the bulls … but from a strategic standpoint, what happens next?
The Non-Confirmation
Non-confirmations can last a long time.
For example, the Oil & Gas sector XOP, declined for eight months, from April 2019 to January 2020, before the price of oil (USO) finally broke lower.
With the ZeroHedge article just released a few hours ago, we can expect at least a blip higher at the next GLD, open.
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® 