Best of the Week
Most Popular
1.UK General Election BBC Exit Polls Forecast Accuracy - Nadeem_Walayat
2.UK General Election 2017 Seats Final Forecast, Labour, Conservative Lib-Dem, SNP - Nadeem_Walayat
3.UK General Election 2017 Forecast: Conservative 358, Labour 212 Seats - Nadeem_Walayat
4.Theresa May to Resign, Fatal Error Was to Believe Worthless Opinion Polls! - Nadeem_Walayat
5.UK House Prices Forecast General Election 2017 Conservative Seats Result - Nadeem_Walayat
6.The Stock Market Crash of 2017 That Never Was But Could it Still Come to Pass? - Sol_Palha
7.[TRADE ALERT] Write This Gold Stock Ticker Down Now - WallStreetNation
8.UK General Election Results Map 2017 vs 2015 vs Opinion Polls - Nadeem_Walayat
9.Orphaned Poisoned Waters,Severe Chronic Water Shortage Imminent - Richard_Mills
10.How The Smart Money Is Playing The Lithium Boom - OilPrice_Com
Last 7 days
Best Cash ISA for Soaring Inflation, Kent Reliance Illustrates the Great ISA Rip Off - 24th Jun 17
Gold Summer Doldrums - 23rd Jun 17
Hedgers Net Short the Euro, US Market Rotates; 2 Horsemen Set to Ride? - 23rd Jun 17
Nether Edge By Election Result: Labour Win Sheffield City Council Seat by 132 Votes - 23rd Jun 17
Grenfell Fire: 600 of 4000 Tower Blocks Ticking Time Bomb Death Traps! - 22nd Jun 17
Car Sales About To Go Over The Cliff - 22nd Jun 17
LOG 0.786 support in CRUDE OIL and COCOA - 22nd Jun 17
More Stock Market Fluctuations Along New Record Highs - 22nd Jun 17
Understanding true money, Pound Sterling must make another historic low, Euro and Gold outlook! - 22nd Jun 17
Green Party Could Control Sheffield City Council Balance of Power Local Election 2018 - 22nd Jun 17
Ratio Combo Charts : Hidden Clues to the Gold Market Puzzle - 22nd Jun 17
Steem Hard Forks & Now People Are Making Even More Money On Blockchain Steemit - 22nd Jun 17
4 Steps for Comparing Binary Options Providers - 22nd Jun 17
Nether Edge & Sharrow By-Election, Will Labour Lose Safe Council Seat, Sheffield? - 21st Jun 17
Stock Market SPX Making New Lows - 21st Jun 17
Your Future Wealth Depends on what You Decide to Keep and Invest in Now - 21st Jun 17
Either Bitcoin Will Fail OR Bitcoin Is A Government Invention Meant To Enslave... - 21st Jun 17
Strength in Gold and Silver Mining Stocks and Its Implications - 21st Jun 17
Inflation is No Longer in Stealth Mode - 21st Jun 17
CRUDE OIL UPDATE- “0.30 risk is cheap for changing implication!” - 20th Jun 17
Crude Oil Verifies Price Breakdown – Or Is It Something More? - 20th Jun 17
Trump Backs ISIS As He Pushes US Onto Brink of World War III With Russia - 20th Jun 17
Most Popular Auto Trading Tools for trading with Stock Markets - 20th Jun 17
GDXJ Gold Stocks Massacre: The Aftermath - 20th Jun 17
Why Walkers Crisps Pay Packet Promotion is RUBBISH! - 20th Jun 17
7 Signs You Should Add Gold To Your Portfolio Now - 19th Jun 17
US Bonds and Related Market Indicators - 19th Jun 17
Wireless Wars: The Billion Dollar Tech Boom No One Is Talking About - 19th Jun 17
Amey Playing Cat and Mouse Game with Sheffield Residents and Tree Campaigners - 19th Jun 17
Positive Stock Market Expectations, But Will Uptrend Continue? - 19th Jun 17
Gold Proprietary Cycle Indicator Remains Down - 19th Jun 17
Stock Market Higher Highs Still Likely - 18th Jun 17
The US Government Clamps Down on Ability of Americans To Purchase Bitcoin - 18th Jun 17
NDX/NAZ Continue downward pressure on the US Stock Market - 18th Jun 17
Return of the Gold Bear? - 18th Jun 17
Are Sheffield's High Rise Tower Blocks Safe? Grenfell Cladding Fire Disaster! - 18th Jun 17
Globalist Takeover Of The Internet Moves Into Overdrive - 17th Jun 17
Crazy Charging Stocks Bull Market Random Thoughts - 17th Jun 17
Reflation, Deflation and Gold - 17th Jun 17
Here’s The Case For An Upside Risk In The Global Economy - 17th Jun 17
Gold Bullish on Fed Interest Rate Hike - 16th Jun 17
Drones Upending Business Models and Reshaping Industry Landscapes - 16th Jun 17
Grenfell Tower Cladding Fire Disaster, 4,000 Ticking Time Bombs, Sheffield Council Flats Panic! - 16th Jun 17
Heating Oil Bottom Is In.(probably) - 16th Jun 17
Here’s the Investing Reason Active Funds Can’t Beat Passive Funds—and It Worries Me a Lot - 16th Jun 17
Is There Gold “Hype” and is Gold an Emotional Trade? - 16th Jun 17

Market Oracle FREE Newsletter

The MRI 3D Report

Trump vs. the Stock Market

Stock-Markets / Stock Markets 2016 Mar 08, 2016 - 06:04 PM GMT

By: Clif_Droke

Stock-Markets

The broad equities market has gotten a respite from the selling pressure which plagued it for the last few months.  Some of this can be attributed to the Kress cycle “echoes” which we reviewed earlier this year.  The echoes, which are based on the 6-year, 10-year, and 30-year cycles, suggested that stocks could experience a rally in the March-April time frame based on past rhythms.  To date that expectation has materialized as traders cover short positions that were built up to excessive proportions in prior months. 


Adding to the upside in equities lately has been a long overdue relief rally in commodities and natural resource stocks.  Much of the selling pressure plaguing stocks in recent months was a spillover of commodity market weakness.  With commodities now on the upswing, stocks are getting a major reprieve.  

The following chart shows the PowerShares DB Commodity Index Tracking Fund (DBC), which largely corresponds to the CRB commodity price index.  The greater the distance DBC puts between its January low, the better it will bode for the near-term stock market outlook.  A continued rally in commodities would also signal to investors that the global market crisis is in a condition of stasis.  This in turn should serve to increase risk appetite among investors. 

To date, all the classic signs of an interim bottom are in place.  The NYSE advance-decline (A-D) line is outperforming the NYSE Composite Index.  NYSE advance-decline volume is also confirming the rallies.  Most importantly, the number of stocks making daily new 52-week lows on the NYSE has drastically fallen under 40 since last month. This tells us that the market’s internal health is improving and that internal selling pressure is no longer a major problem.

Moreover, the short-term and intermediate-term rate of change (momentum) of that new highs-new lows have dramatically improved in recent weeks.  Because the number of stocks making new lows has dropped significantly while the overall hi-lo differential has been positive, the momentum of the new highs-new lows has finally turned up after being down for months.  This indicator has been an invaluable aid to confirming that the near-term path of least resistance for stocks since last month is up.
  
Arguably the biggest boost to equities in the near term has been the upward turn in the crude oil price.  Oil is widely regarded as the most important indicator for the overall health of the global economy.  Plunging prices in the energy market in past months created a deflationary scare among investors and stoked fears of a global economic recession.  Those fears aren’t completely without foundation, but for now another proverbial bullet has been dodged as the oil price enjoys a much-needed relief rally.

Finally, I would point out the bullish nature of the Dow Jones Transportation Average (DJTA) which has also been a strong leading indicator for the broad market – particularly the Industrials.  The leadership of the DJTA has been bullish from a Dow Theory perspective, especially since the Transports led the way lower for the Industrials last year. 

As the following graph shows, DJTA is about to test an important chart resistance at the 7,800 area.  A breakout above this level would pave the way for another leg higher in the major indices from a Dow Theory standpoint.

In the previous commentary I noted that the bulls would likely do everything in their power to protect the 9,000 level in the NYSE Composite Index (NYA) from being violated.  The NYA found support above 9,000 and has benefited from a vigorous short-covering rally since as the implications of a breakdown below this key technical level are simply too severe to happen at this time. 

One reason for the premature nature of a break under 9,000 is the spillover impact such a breakdown would have on the global financial economy.  The upcoming presidential election is another factor.  Surpassing worries over the global economy lately has been the hysteria over the U.S. presidential race.  Investors have been polarized over the leading candidates in both parties, particularly over the primary victories of a certain billionaire candidate. My policy of not commenting on politics forbids me from injecting an opinion, but I’d like to share at least one insight. 

The current Republican frontrunner has undeniably garnered a rather sizable protest vote among disenchanted voters.  In many ways Mr. Trump’s candidacy recalls the populist uprisings of past elections which saw the short-term success of candidates William Jennings Bryan, George Wallace and Ross Perot.  In each of these cases an uncertain economic outlook led to the rise of dark horse populist frontrunners. 

In the final analysis, however, America’s inveterate tendency to vote for the most electable candidate (based on the conventions of the day) won out and the extremism that characterized the earlier stages of the elections was ultimately discarded.  Observers should keep that in mind as the country’s collective passions rise with temperatures this spring.    

It also would appear that Mr. Trump’s ascension has been tied, to an extent, to the economic and equity market sluggishness of the last year.  Indeed, his biggest victories to date have occurred when stock and commodity prices have been on the downswing and the market has been internally weak.  But what happens if the market rebound gains traction and continues beyond March-April seasonal strength?  Could this not fuel a resurgence in the prospects of his closest rival for the nomination?  If nothing else it would erode deflation fears among investors, which in turn would defuse the urgency of the protest vote.  While some may scoff at this unorthodox association, pundits would do well to monitor the correlation in the weeks and months ahead.

Mastering Moving Averages

The moving average is one of the most versatile of all trading tools and should be a part of every investor's arsenal. Far more than a simple trend line, it's also a dynamic momentum indicator as well as a means of identifying support and resistance across variable time frames. It can also be used in place of an overbought/oversold oscillator when used in relationship to the price of the stock or ETF you're trading in.

In my latest book, Mastering Moving Averages, I remove the mystique behind stock and ETF trading and reveal a simple and reliable system that allows retail traders to profit from both up and down moves in the market. The trading techniques discussed in the book have been carefully calibrated to match today's fast-moving and sometimes volatile market environment. If you're interested in moving average trading techniques, you'll want to read this book.

Order today and receive an autographed copy along with a copy of the book, The Best Strategies for Momentum Traders. Your order also includes a FREE 1-month trial subscription to the Momentum Strategies Report newsletter: http://www.clifdroke.com/books/masteringma.html

By Clif Droke

www.clifdroke.com

Clif Droke is the editor of the daily Gold & Silver Stock Report. Published daily since 2002, the report provides forecasts and analysis of the leading gold, silver, uranium and energy stocks from a short-term technical standpoint. He is also the author of numerous books, including 'How to Read Chart Patterns for Greater Profits.' For more information visit www.clifdroke.com

Clif Droke Archive

© 2005-2017 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife