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As we have often warned, reversals can tend to line up with expiration.
This is expiration week, so I expect some topping action into this week.
And from there the market could be vulnerable into September.
There’s plenty of energy in this market to continue higher. What has me
cautious here is the lack of a previous 9 month cycle low – suggesting the
market will make up on this 20 week (note the chart incorrectly points at 10/1
as a 9 month, it’s a 20 week, which carries more weight because of the lack of a
previous 9 month bottom. One could argue that the April bottom represented
an early (left justified) 9 month cycle low – but that’s what makes a
In this really long term view of cumulative breadth, we see a normal
However, the view from volume is a little more concerning. If the
market stalls here – then we’d get a little more bearish.
Another warning sign is coming from the ECRI. There’s a question about
the health of the economy. This is critical here if the ECRI turns lower,
so too will the market.
Gold is approaching an action point. We’ll be watching for gold traders
to get overly bullish and position for a contrarian trade.
Some of our indicators are developed to identify anomalies in trading action,
which can sometimes lead to reversals. We’re still monitoring this
indicator for signals – but we have one now on nat gas, which is testing lows
And on oil, traders are still bullish as CALL volume dominates even as oil
And finally, an observation with oil open interest whose direction is
bearish, but level could be approaching bullish. Oil’s opening weak as we
open this week and I trust you’re seeing it at the gas station as I am…
So we see this week as being a set up week for the next larger move. If
the market continues higher and complacency sets in, then we could be
positioning for a bearish September approaching a 20 week cycle low.