Oil Pops On Trump’s Iran Decision While SPX Deals With Resistance – Mike Swanson (05/09/2018)

I was going to do a live video session yesterday after the close about what sectors look hot now, but I decided to hold off.

I just don’t see anything exciting at this moment as the market seems to be hitting a bit of a wall again and I’m not sure if it is really going to be able to bust it and do much.  We’ll see what happens.

Maybe I’ll see interesting things to buy in a few days or next week and I’m not going to just give ideas to give them.

At the same time the sector that has actually done the best in the past few weeks is the energy sector and it is popping this morning on Trump’s decision to abandon the Iran deal in order to create a new crisis (lots of stories about that in my top stories of the day).

That’s good for Saudi Arabia and oil prices and so oil stocks ran up into that news.  I’m just not into buying into sectors AFTER they have pumped into news.  When something runs into an event you usually see profit taking afterwards.  The time to buy oil stocks was a few weeks ago.  That doesn’t mean I think they are going to crash, but I just don’t see an entry point here until they pause and digest this move or pullback.  So I’m not going to go pump oil stocks like I’m sure I’ll see some on CNBC do today.

I want to give you my view today of how big a SPX breakout rally could be if it were to happen.

Now going into this week we had our eyes on the triangle pattern for the S&P 500 that everyone was predicting would lead to a breakout and rally.

It hasn’t happened yet and so the market appears to be hitting a wall again. 

Now on Sunday I did an interview with Ike Iossif about his money flow indicators for the S&P 500.  They were showing that if a breakout were to trigger that the rally wouldn’t lead to a giant run, because the buying pressure in market has been weakening all year.  Ike thought maybe it would last a few weeks while so many were saying it would just go on all year.

It can still happen, but the thing is if the breakout doesn’t happen this week then the pattern will basically be negated and that will mean that we’re in a sideways phase in the markets, which BTW is still consistent with a big stage three topping process.

Or to put it another way if the triangle doesn’t break out to the upside like everyone is predicting soon then it just doesn’t mean anything.

I want to show you the simple reason though why the market has had trouble breaking out in the past two days.

First here is the triangle.

If the market doesn’t break to the upside soon through the SPX 2700 level and then breaks the triangle next week I just think it means there will be a short-lived move that won’t amount to much.

Here is the problem.

Last week when the market had the big rally day on Friday to get everyone excited the move was fueled by a big gain in Apple as Warren Buffett pumped it by announced that he now owned 5% of the shares just days after the company announced a $100 billion dollar buyback plan.

Apple explode last week and helped make the market go up.

Apple has a huge impact on the market, because it weighs 12% of the Nasdaq 100 and 5.23% of the DOW. 

So when Apple goes up big it helps to push those averages and the ETF’s DOW, QQQ, and SPY up too, which provokes people to buy them and so on.

But now look at the AAPL technical analysis chart and you’ll see that the stock price is extremely overbought now.

With AAPL stock overbought it is unlikely to go anywhere.  It simply hit a wall and is going to consolidate here for weeks before moving higher or pull back.  Since AAPL by itself helped to generate last week’s rally that means that the stock market needs a new wonder stock to move it higher, because there are no sectors I see right now in a position to do that.

And that’s also why I didn’t do yesterday’s live session.  I just don’t see any key sector in a position to really breakout right now and run!

There are other ways to make money, but that’s what I was planning on making that video session about. 

Now here is the key point – if the market were to break this triangle today and start to rally the rally will not be led by Apple again, but by stocks that are in oversold conditions. 

Oversold conditions can be worked off in stocks with hard bounces or simply by time.

So if the market doesn’t start a good rally this week then these oversold conditions in these stocks will just disappear and the odds of a big rally anytime in May will diminish to practically nothing. 

Of course there are now many stocks in very vulnerable positions.  In fact there are five stocks in the Nasdaq 100 that I think are in big trouble.  To grab my free report on them click here.

 



Share This Post