Look at this chart and you can see that commodities are on the tear....one could argue that that has shielded the ASX somewhat..
Commodities are shooting higher because of supply chain shocks and rising concerns over inflation. But will this last perpetually?
No. At some point , prices would have risen to the level at which demands level off and demand will level off as global economy starts its descent.
So given this, how much upside more to the commodities complex? And again, is it not the best time to sell when things are going good or should I say relatively good,...because commodity stocks aint doing all that great either because equities are equities...market participants are not going to discern commodity equities from other equities as if they dont belong to the same asset class.
You can see how quickly the CRB can turn down over 3-4 months back in early 2020.
A New Short-Term Downtrend Has StartedBy
Douglas Gammons of
HeadlineChartsSaturday, February 12, 2022 12:30 PM EST
Market price action has been really bad lately, and a new short-term downtrend has started. Although the PMO index has not yet turned lower, several of the other indicators are pointing lower in a convincing fashion.
The PMO index has maintained its strength, and it has moved to the top of its range despite the weak market and a huge number of new lows. My guess is that the PMO indicator isn't able to keep up with the volatility in the market at the moment.
The major indexes are pointing lower and are well under their 5-day averages.
The
SPX and
NDX bullish percents are clearly headed downward.
The SPX equal weight momentum indicator is peaking while the index is trading under its 50-day average. This chart is targeting at least the January low.
IBD's David Ryan stated last Monday that the SPX was likely to rally and then fall under its 50-day, and that the NDX was likely to rally and fall under its 200-day. It looks like that is exactly what happened. You can't call a market better than that.
The junk bonds ETF (
JNK) fell off a cliff, but it may be near a support level. Generally, you may want to invest in the direction of junk bonds, and so far this year the chart has been telling us to avoid stocks. If junk bond prices start to firm up at this support, maybe the stock market will bottom out? It's way too soon to know, but this may be good to keep in mind.
The huge number of new 52-week lows continues. This is such an under-appreciated indicator of market health. This many new lows, while the PMO index is at the top of its range, make for a very bad combination. This chart is confirming to me that we've just experienced a counter-rally in stock prices and that the larger trend remains down.
The total US net high-low 5-day average ticked down every day last week while we were supposedly in a short-term market uptrend. Bearish.
Why is the market suffering so? This commodity index is the culprit. This is quite a spike in commodity prices. How much higher can it go without a pullback? I don't know. But, I would be more surprised if it continues to rally than I would be if it were to pull back to its uptrend line.
For the second time this year, I have sold all my longs and now I only hold some bear 3x funds. Also, I've recommitted myself to my own trading strategy after a poor trading performance last week in which I broke my own trading rules.
I own the bear 3x funds because the PMO index is at the top of the range while the number of new 52-week lows is spiking. That is a pretty good setup to make some money going short the market, in my opinion.
I point this out because I want to mention that I am not trying to predict where stock prices will go based on the geopolitical events in Ukraine. In general, I think it is really hard to trade events and news because they can whipsaw prices lower as expected, but then prices can turn on a dime and whip higher again as all the shorts rush to get out.
So, I am going to keep to my strategy and only short the market when the setup is right and then quickly take profits without trying to catch the bottom.
Outlook Summary- The short-term trend is down for stock prices as of Feb. 11.
- The economy is in expansion as of Sept. 19, 2020.
- The medium-term trend is down for treasury bond prices as of Jan. 3 (prices down, yields up).
