The Market Needs Higher Oil Prices WPRT AXK
The market broke its winless streak yesterday as
most major indices closed higher for the session. Volume was about the
same as Tuesday’s level and the indices continued to consolidate near the
50 day moving average. The leader yesterday was energy which I have
repeated many times will be the catalyst to take us higher.
Over the past month commodities have sold hard. But now, I think
that commodities are ready to start a rally. While that rally will not
take commodities to new highs; the strength from that sector will likely
provide the momentum that the market needs to achieve new highs.
Silver and oil were both big gainers yesterday. And oil will need
to keep that momentum going for the rest of the week.
Last week oil broke $97 support and quickly dropped below $96
before staging a huge 4% reversal. Yesterday, oil broke out past
resistance to $101 and the bulls need to maintain that break out and
avoid a reversal back to $97. Oil, and all other commodities, should
receive some help from a falling dollar today.
While I continue to favor the bulls, the TradeMaster
portfolio is sitting on a lot of cash. Our two disaster hedges remain in
place along with one short position and one long position. But I need to
add to the long side sometime this week. Fortunately our single long
trade was up 20% yesterday and I am not selling AXK just yet.
I have waited for the market test 1301 to enter additional long
trades. My concern about trading the bullish side of the market too early
is that it’s a quick ride to 1250 if 1301 were to fail.
So I would really prefer to wait and hold off on new positions until I
can see the price reaction to 1301 support. Without a test of that key
area of support the market is more prone to reverse any rally higher from
here. And with 1332 acting as resistance getting long right now may not
offer a whole lot of upside.
But sometimes beggars can’t be choosers, and we may have to get
long ahead of the 1301 retest – especially if 1332 does not keep buyers
at bay.
The market completely shrugged off a disastrous durable goods
release yesterday. Durable goods orders fell 3.6% in April and much more
than a 2% decline that was widely expected by economists. Today we get
GDP estimates, but they will not matter; yesterday’s awful economic
numbers coincided with an up day in the market, which proves again that
fundamentals are not driving this rally. One day, fundamentals will have
relevance again but until then we can ignore most economic releases
including today’s Q1 GDP estimate.
The stocks from last
weekend’s video have all performed nicely. My next trade
will likely come from that group, but it will unlikely be RPTP or WPRT
which have already made their moves this week. I am also working on a
Top
Ten Trades of the month report, which I aim to have done
tomorrow.
The report will have a few familiar picks from the weekend video
and some new setups. Unlike last time, this month’s report will have
bearish trade setups. Also, I will try to be clearer with regards to what
activates each trade signal; it is my belief that many of you took
positions ahead of break outs that resulted in losses. It’s fine to take
action ahead of a break out, but not recommended since my analysis from
the report hinges on the break out.
