Crude and Stocks are locked in a fight, a battle for market direction. For so long now every significant move in Crude has been reflected in the stock market by an inverse move. One of these days, that relationship will weaken, but until it does, I have to trade with one eye on real time crude data.
The Bigger Picture
Nasdaq futures – retesting late Feb lows as of yesterday.
Dow futures – retesting same.
What’s most interesting is that the market did not gap down this morning, knowing that Crude was trading up significantly before the open. This suggets a willingness of market participants to speculate that Crude may be reaching a local, at least short term, high on buying exhaustion. Confirmation of this would be a sell off pushing back deep into yesterday’s range.
Such a sell off will inevitably spark a significant market rally, given the apparent breakout from the test of top noted on the Crude chart in this morning’s issue of The Day Ahead.
Clearly this price failure in crude has not materialized as yet and may not – the point of developing such a scenario is to prepare ourselves for what may transpire so that we can be emotionally ready to react appropriately.
Therefore, IF crude fails to hold its opening low and IF crude starts to gather downward momentum intraday, we’ll will want to quickly act, taking out new long orders in the broader market. I use ETFs to quickly gain exposure at such times.
We must also bear in mind that any rise from here faces significant resistance – so once filled on new long orders our first goal will be to get protective stops up near or at break even. Once at break even we can relax and let others continue the battle.
05.03.17 10:46 #