Hello MarketClub members everywhere. Like many people around the world, I was watching the events unfold last night in Indiana.
The two big surprises to me were the fact that Ted Cruz suspended his campaign and that Bernie Sanders won the Democratic primary. So what does all of this mean and how likely will it affect the markets?
For some time now the market has been moving sideways and looks as though it's reflecting the lower growth rates that we are seeing. Occasionally you'll see it pop, but then the market just seems to fall back under its own weight. The stock market is a forward-looking vehicle which looks ahead 6 to 9 months into the future. I think it's predicting that the battle between the representatives of both the Democrat and Republican parties will get nasty. All of which will translate into negative news for the stock market in the interim.
Having said all that, I'm going to do what I always do and that is separate fiction from fact with the use of the Trade Triangles. What I mean by that is if everyone says a stock should go up, but the stock is going down, then you have to understand that the trend is down and not what everyone wishes it should be.
One of the standout features on the indices today is that they are all below the 50 RSI line which should be support. The fact that they are below this line is not a good sign; it indicates a potential for further weakness. Another sign of weakness, particularly in the NASDAQ (NASDAQ:COMP), is the fact that a weekly red Trade Triangle triggered on April 28 indicating that a sidelines position is in order. The Dow (INDEX:DJI) will trigger a red weekly Trade Triangle if it dips below 17,553. Similarly, if the S&P 500 (CME:SP500) moves below 2,039, it would trigger a red weekly Trade Triangle as well. It is possible we could get there this week, so close attention should be paid to those levels.
Gold (FOREX:XAUUSDO): After flirting with the $1300 level, gold has pulled back, but has not changed its general direction. I would not be surprised to see this market consolidate before breaking through the $1300 announced level. Both long-term and intermediate-term traders should maintain long positions. Short-term traders should be on the sidelines for the moment.
Crude Oil (NYMEX:CL.M16.E): I still like the formation I see on the crude oil chart. However, if you are a short-term trader, you should be on the sidelines at the moment. One key level to watch on the June contract is the 42.91 level which is the PSAR number. Should that level be broken, it would indicate further weakness. You should also keep an eye on the RSI indicator, presently trading around the 57 level, to find support at the 50 level. This is a classic case of everyone saying we have too much oil so oil prices can only go lower. But, look what happened in reality, oil went from $28 a barrel to well over $40 a barrel in just the past four months. The Trade Triangles, on the other hand, ignore all of the fundamentals and focus on price movement. Pricing is the bottom line on your trading statements.
Tesla Motors Inc. (NASDAQ:TSLA): Tesla reports its earnings after the close today and they're expected to show a continued loss of as much as $.60 per share compared to a .35 loss they reported last period. Based on the Trade Triangles, you should be on the sidelines with a mixed picture based on the monthly Trade Triangle being green and the weekly Trade Triangle being red.
Facebook Inc. (NASDAQ:FB): It is all systems go for this stock. The one thing that concerns me now is talk that Facebook could be the world's first company worth a trillion dollars. I remember when everyone was saying that Apple Inc. (NASDAQ:AAPL) was going to be the first company to hit that mark - what happened? They also said that about Alphabet Inc. (NASDAQ:GOOG), what happened there? The bottom line is that the world changes as technology and events change entrenched business models. Just look at how powerful Microsoft Corp. (NASDAQ:MSFT) once was, but under Steve Ballmer's stewardship, it completely missed the mobile revolution. Can Facebook become the first trillion dollar company? Your guess is as good as mine.
Stay focused and disciplined.
Every success with MarketClub,