Sell Oil Still?
4/30/2014 5:30:24 AM
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Good morning Traders,

As every day unfolds, we have new data to analyze.  In today’s Daily Stock Barometer, here’s what we are seeing and how we interpret it:

 equity put call ratio

Periodically we’ll see a trend developing behind the scenes that will have a big impact on prices.  This is huge because increased fear equates to fuel to rally.  So even if we do get a post fed meeting sell off, it will be short lived.  Our next key reversal date is 5/6. 

Since it is Wednesday, we look at our measure of the II data.  A simple rate of change view suggests in the short term that the potential if for this to turn higher with the markets.

 Investor's Intelligence

One concerning thing developing is the relationship between the QQQ and SPY.  A turn lower here for the Qs would be very bearish.  The potential exists.

 QQQ SPY RSI

Another interesting divergence, which is a bullish one, with our barometer showing increasingly bearish energy developing as prices hold up. 

 stock market timing

Putting this all together, we remain in Buy Mode and expect the markets to rally for at least 1-2 weeks.  That being said, there is the potential for a bearish reaction to the Fed’s statement today, and if we do see selling, it could be sharp – but I would only expect a week or two of selling and then a resumption of the upward move – given that the market has already done the work of correcting without it being reflected in price action.

We remain in OIL PUTS in our Oil Options Trader service.  For those who have access to our IRG MARKET TIMING RESEARCH, below are our oil charts that we use to make our determination.  We’re starting to see some mixed signals with the dollar, and that can play out in the OIL market – so we’ll have an update soon. 

Oil Charts

I also have several new charts which take our indicators and show expected returns.  We will be adding them soon. 

Regards,

www.stockbarometer.com

Advising Clients For Over 10 Years…

Things are still proceeding as we predicted.  The links below detailed this set up from a week+ ago.

Here’s an updated image of oil volatility:

oil volatility chart

If you’re interested in becoming a client of ours, and get access to our data base of indicators, click here for our stock market timing service.

Regards,

Stock Barometer

 

Click here to go to our oil short trade

 

One of the best things about the recent advent of new commodity ETFs is the fact that you can play big macro plays, rather effectively and efficiently.  Here’s how to trade oil and our forecast into 2012.

If after reading this article, you would like to know more about our market timing system, which covers the overall market and oil, gold, bonds, the dollar and QQQ – click here.

Here’s a tutorial on how to trade OIL and our forecast.

Actually, you can trade oil just like any other ETF – like QQQ or SPY.  The symbol is called USO.  One thing you have to realize, is that it’s not the best long term hold.  It’s better for a shorter term trade.   Or a few month Macro trade.  The reason is that the ETF is based on front month futures, which are subject to Contango when the futures contracts roll over. So I never recommend it for a long term hold for any of my clients.

How to get more bang for your buck.

The world of ETFs also gives you exposure to leveraged ETFs.  You can now get 2x leverage on oil by trading the following ETFs – UCO and DTO.  UCO gives you 2x leverage to the upside and DTO gives you 2x leverage to the downside.  For example, DTO will go up at 2x the rate that oil goes down.

To interpret the OIL market, you can use fundamental analysis, technical analysis and sentiment analysis – the three pillars of trading that everyone talks about.  However, I’m not a big fundamental guy.  There’s too much guessing involved and the market forecasts the future by 6 months, and anything fundamental looks backwards or at best, only looks at current conditions.

So that leaves us with technical and sentiment.  On technical analysis, I think too many traders make it too complicated.  Are prices about to reverse and are they more likely to continue up or down.  That’s all you really need to know.  We have a simple indicator below that will show you this.

On the sentiment side, oil also has a volatility component, just like our stock market.  When oil goes down, volatility goes up, and at extremes, it can give you signals.  Here’s what it looks like right now (well, as of this writing).

uso oil uco dto volatility

This shows us that volatility is reaching a relative extreme, where it can start to move lower.   Now let’s take a technical view:

how to time the oil trade

We also have a special tool here at Investment Research Group, Inc.  I’ll share it with you today.

leading indicator for trading oil

It’s a leading indicator for oil (something oil tends to follow in time) and it’s suggesting lower prices to come.  All the way into 2012.

So what does this mean?  Sell oil!  Try to sell oil on every sell signal you get with our timing indicator.  This is the same 3 step process I take with oil (as well as watching the dollar closely).

Remember, you can be right on every part of a trade, except if you’re early, you will sustain losses.  So always use proper money management.  Meaning get out with small losses and reenter on a better signal.

I hope you found this useful.  If you want more advice from us, you can subscribe to our Daily Stock Barometer:

If after reading this article, you would like to know more about our market timing system, which covers the overall market and oil, gold, bonds, the dollar and QQQ – click here.

If you want to sign up for our free weekly newsletter, you can click here.

And finally, I have a team of traders that advise on the market, depending on what you want to trade.  Click here to learn more about our stock market traders.  Note, Mark McMillan’s service also comes with access to his daily chat room.

Regards,

Stock Barometer