Oil surged this week on the back of OPEC suggesting they might hold back a little production. While the news from OPEC is timely, The chart for Oil (WTIC) shows a lot of stress at this $48 level. One very positive development is a higher short-term high above the $47.75 high. We have been trading $42-$50 since April.
This is a continuation of the article: "The Bank Review Three Months After Brexit" Click on the link to read it first.
In hindsight, Brexit injected fear into the market and the market has rallied hard for three months. Let's zoom in on some of the banks close to the issue.
HSBC is one of the world's largest banks residing in the UK. With an SCTR ranking of 86.7, it is in the top quartile for large-cap price performance now. We can see the highs of $49 and $48 in 2013 and 2014 have created a ceiling for the stock but this level is a long way away from the current price. HSBC really jumped off the 4-year lows. As the stock is at a major resistance level, this is an important test for the stock. So far the stock broke out to a new high above $38.24 but then failed to hold it. That is not a positive.
This article was first published on June 27, 2016. All of the charts have been updated to check our progress.
Since the sub-prime financial crisis, there has been a lot of discussion about Too-Big-To-Fail, Bank Stress Tests, and Central Banks using unique tools to try and keep the market on an even keel. One of the problems in the world is the deeply indebted government entities. What makes that issue unique is our global commercial banks own government debt as AAA debt to support their loan book. The assumption is that sovereign nations can always raise taxes to get paid back.
One of the keys to recognizing the Financial crisis in 2008 was that the banks started showing lower lows and lower highs while the indexes tried to make higher highs. Something seemed wrong.
Commodities continued their pullback this week. The problem is that a lot of them have been teetering on support. This week marks a break in my optimism. First, Crude oil finished the week at the uptrend line. On the webinar, I used the close rather than the intraday lows. The bottom line, oil needs to hold here.
As the 10 Year Yield ($TNX) broke out of its trading range, it injected volatility into the market between Friday and Wednesday. Until this starts to settle down, it is likely that we see wide price swings each day affecting a lot of the asset classes. In the near term, this range at 17.5 may hold but the highs for the year are around 20.0. The 200 DMA at 18.0 could also provide some upside resistance.
- Oil Continues To Test High $40's
- Natural Gas Consolidating
- Oil And Gas Stocks Lead The SCTR Rankings
- XLE Breaks Out Of A Major Base
Crude Oil ($WTIC) continues to flirt with breakout levels. This $47.50 seems to be a meaningful area of attention. We'll continue to watch this level in the coming months. Here is a link to the webinar.
The Energy Sector SPDR (XLE) has been trying to breakout for the last few weeks. Even as Crude Oil and Natural Gas pulled back, the XLE held firm. Today it is breaking out!
I have my regularly scheduled webinar today at 5 PM EDT for those interested in finding opportunities in the energy space. Commodities Countdown 2016-09-08.
Don't forget about ChartCon 2016! It's only 2 weeks away!
This month, Chartcon 2016 is coming to you via live stream broadcast! Rather than have customers spend all the money to travel to the event, we have arranged for all the technicians to gather in one location and broadcast from there, saving you thousands of dollars. It should be a fantastic couple of days with a tight synopsis of the markets from an award winning Technical Analyst crew. You can register for this event for under $200 and have access to the recordings. Chartcon 2016.
Next, I will be presenting in person at Golden Gate University in September if you are in the area.
September 20th, 2016 @ 4 PM
Golden Gate University. Rm 3214
536 Mission Street
San Francisco, 94104
Cost: Registration is $10 for MTA members and $20 for non-members
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The charts have been bullishly aligning for the majority of the commodities since the January/February lows. With the US Dollar trading between 93 and 100 for 19 months, the stability of the dollar has been helping some of the commodities regain some chart strength. With the $USD in the middle of the range, 8 commodities either lost the support of the 40 WMA or broke a support trendline in the last 2 weeks. That is not the action we would expect to see.
Gasoline ($GASO) lost 40 WMA support in the energy sector. Crude Oil ($WTIC and $HOIL) are still holding up above the 40 WMA...barely. Heating Oil ($HOIL) gave us a trend line backtest that looked successful but now looks unable to get back above trend. So these two start the parade.
Two of Canada's largest companies in the Agriculture related space confirmed they were in merger discussions on Tuesday. While Agrium (AGU, AGU.TO) is widely considered an acquisitive company, this has not been the history for Potash Corp. (POT, POT.TO).
A few things need to be reviewed here. First of all, Potash prices have been struggling since the collapse of the potash marketing consortium, Canpotex. As this Potash pricing problem doesn't appear to be resolving itself anytime soon, Potash is struggling. It appears that Agrium wants to continue to expand its vertical integration model for supplying the farmer. With a retail arm firmly in place, Agrium does a nice business supplying the farmer with crop inputs and then helps them with the sale of the grain during and after the harvest through their network of grain terminals.
Let's look at the charts to see what might be happening technically. Starting with Potash Corp, the stock is roughly half of its preceding market value before the breakup of Canpotex. Again, Canpotex was the marketing consortium controlling price on Potash. Before Tuesday's announcement, Potash's US listing was trading at $16 USD which is about 25% of the 2008 high of $65. That can motivate a management team to look for strategic alternatives.
The commodity pops and drops this week have been very sudden both ways.
Oil struggled as it approached $50 and has drifted back this week. This is not really a surprise, as probably every floor trader was selling at resistance. It has now built a nice channel between $39 and $50. If crude breaks through over the next few weeks, expect it to accelerate quickly.
I started off with a review of the webinar I shared with Martin Pring on Tuesday, August 23rd. Members can find that previous webinar at the StockCharts webinar archives. There were a few questions from the survey results that I tried to answer in the review portion of my Commodities Countdown webinar.