We retired our "Five Bull Market Barometers" in mid-July last year to make room for a new weekly post that's focused on the three most important charts for the week ahead.
This is that post, so let's jump into this week's edition.
We questioned whether it was a rounding top reversal pattern – in which case we’d be looking for a breakdown.
Or, if it was actually a failed breakdown - and we all know what tends to follow those patterns…
The responses we received were mixed. But there were plenty of bulls who wanted to be long against the former lows and bet on a swift reaction higher.
That’s pretty much the camp we were in too. We recently wrote about all of the whipsaw action we’ve been witnessing.
We said the next critical piece of information we’d be looking for was whether or not these patterns would see some real follow-through and confirmation.
Fast forward a week or so, and we definitely have our answer.
So let’s talk about it, and more importantly, what it means for risk assets.
From the desk of Steve Strazza @Sstrazza and Ian Culley @Ianculley
In today’s Commodity Report, we zoomed out to our monthly charts to reconnect with the primary trend. This exercise really allows us to tune out the noise on the weekly and daily charts.
As we were reviewing our charts, there was one recurring theme that kept popping up...
Pullbacks and retests.
The CRB Index retested its breakout zone near the 2018 highs ~206.
Crude oil broke back below a 13-year downtrend line only to reclaim it in recent sessions.
Iron ore fell right back to check in on its 2013 highs.
And even palladium, the one bright spot in the precious metals space, pulled back to a six-year trendline.
But guess what? Just like we’ve recently seen in many of the weakest areas in other asset classes, buyers dug in at these key levels.
Of all these retests, one that stood out most was Uranium.
Once again this month, I’m going to share info on positions that were closed in the month of August. As a reminder, our exit plans are always laid out ahead of time in each trade idea we publish. In every case, the exits mentioned below were all in accordance with the plans as laid out.
As we head towards September expiration, we have three open positions remaining with expiring September options that need our attention. Most of our delta-neutral premium-selling plays worked out in August, which makes sense considering the slow markets we just endured. Let's dive in.
Positions with September options that need monitoring:
This week, Nifty Financial Services broke out to claim an all-time high after forming a six-month base. This sector has been taking a breather for some time now, but we are finally able to see signs of improvement.
Across the world, when strong market rallies come through, they come in unison with Financials. So if this current rally has to continue, we need the support of this sector. Are we going to get that though? Let's see what the charts are saying.
Here is Nifty Financial Services on a monthly timeframe. We do see a resolution of the trend. And prior to that, did you notice something interesting? Something we like to see in particular?
The price was consolidating above the Fibonacci level. That's a good sign. Always!
So now that we have this resolution in trend, the next level we're tracking is 23,350.
Keep in mind, this is a MONTHLY chart. Hence, think 23,350 in the months ahead, not weeks.
From the desk of Steve Strazza @Sstrazza and Ian Culley @Ianculley
Mixed signals have been the rule rather than the exception since the market peaked in early February.
The major stock indexes have continued to print record highs while breadth has deteriorated beneath the surface, creating several bearish divergences.
Some stocks have gone up and some stocks have gone down. But the reality is that most stocks have gone nowhere.
The same is true for commodities.
We’ve noticed pockets of strength in base metals, livestock, and softs. But the majority of commodities have remained range-bound since the beginning of May.
These are the registration details for our Live Monthly Candlestick Strategy Session for Premium Members of All Star Charts.
This month’s Video Conference Call will be held on Tuesday September 7th @ 6PM ET. As always, if you cannot make the call live, the video and slides will be archived and published here along with every other live call since 2015.
