Nobody wants to read long missives. I’ll keep this brief. From a technical perspective, looking at some 7 indicators in my OEXpert 7 Market Timing Program, 4 indicators in my research and analytical program, and other technicals with charts at stockcharts.com; I see these things. RSI is above 70, and high. Stochastic is above 80, and high. A ratio of stocks considered as technically positive as opposed to technically negative has gotten high. And, a particular gauge or measure of market risk has attained unto a rather extreme level again. As these indicators reach their upper levels as they do, the next course is typically downward from here.
In the OEXpert, looking at the price of the S&P 100 in relation to its upper trading bands, and the 6 indicators accessed when hitting the F1 thru 6 keys, are all in a place of high, to very high risk, at this time.
A further look at the volume on this rally, and there has never been any kind of high volume spikes in it. In fact, the volume has generally been well below average, including Friday, which looks to have been the third lowest day of this thing, so far, looking at avg volume for each issue in the 500.
It’s all looking very much like a massive short-squeeze… a short-covering rally.
Oil is at $38.49, a price that will not save the overly indebted drillers, or any financial institutions in deep trouble due to their loans to these energy firms. It must rise to $45 and stabilize above that level, to hope to save these companies.
With Draghi and the EU Central Bank pushing deeper into negative interest rates… beside a short-covering rally, we have a bunch of new ‘money’ from Europe rushing into markets around the world. I would think all of this will be very short-lived. I hope for an opportunity to attempt a Put Option against the SPY, if I think I see that setting up for such a thing. Earnings estimates are still in decline. Oil is not looking like it can make it high enough in time to help out the highly-leveraged energy companies and their lenders. Fundamentally, and technically… it’s sure still looking like a Bear Market rally. Price rose thru the 50-day, and for just a few indexes, their 200-day. The 50-day has not even begun to turn up… in every instance, most indexes have not exceeded their 200-day, and no 50-day is anywhere near close to a ‘Golden Cross’ above their 200-day. It’s still a Bear… if you need to lighten up, now is as good as it might get.
“The markets can remain irrational longer that you can remain solvent!” Since I’m mostly in cash, I’m only missing out on this rally, but I don’t mind. I think it’s the shorts that are getting crushed here… when their buying stops, it’s not likely to be pretty.
“It’s too late, Baby, now, it’s too late!” This states it even better than I knew: http://www.msn.com/en-us/money/markets/oil-rally-is-too-little-too-late-for-cash-strapped-producers/ar-AAgFSRU
And, what went unsaid was this: If sovereign funds are dwindling to meet their countries govt budget needs, they’re not putting money in stocks, and… how long have they been serious net sellers of stock, hmmmmm? Since maybe last Spring? OPEC requires $98.83 oil prices?!?!?! Yikes! That’s not going to happen anytime soon!
And, the issue with oil, isn’t so much the price of oil itself, but all the oil producer debt that cannot ever be repaid, much of which begins to come due in this year! As stated here, but is speaking of entire Latin American nations! http://www.msn.com/en-us/money/markets/from-champs-to-chumps-latin-america-oil-giants-owe-dollar275-billion/ar-AAgGCMi
Here’s to your successful investing!
Harold F Crowell