Market Light Weekly Update August 29th, 2017: The Market Rolls with the Storm

John Dupriest Market Light

Devastation in Houston is unbearable. The pictures are heartbreaking, with unknown numbers of people having their lives blown inside-out.


Amazingly, the price of oil is down … not up. NYMEX is trading today just over $46 bbl; it had jumped to $50 only a couple of weeks ago. It’s the refineries that are hit hard, and if they cannot process the crude you can see how the price of the raw stuff could be down. However, it is the processed products – like gasoline – that are starting to rise. News this morning predicted a $0.20 to $0.40 per gallon jump near term, and it is trading up for the sixth straight day.


Meanwhile, across the globe, North Korea fired a missile over and above Japan. That gave off some bad vibes, but was quickly set aside as the rocket was really high. It didn’t come as close to the Bullet Train as the initial report may have implied.


The big question is, how forgiving can the market continue to be? Our Light has been Orange – Cautious and Deteriorating for a few weeks now. But it hasn’t gotten any worse than that, and in fact there has been some improvement in the technicals. The advance/decline line is moving upward again, and a short term momentum indicator (ParaSAR) has reversed upward as well.


Sector strength this week: Brazil (EWZ), Latin America (ILF), Copper (JJC), Base Metals (DBB), and Lithium (LIT) head the strong list. Oil & Gas Services (XES), Livestock (COW), Natural Gas (FCG), Small Caps (IJS), and Networking (IGN) are among the weaklings.


The Technical Tea Leaves remain fairly bearish:


Analysis of the rate of change of the exponentially smoothed average price suggests that a cycle top is forming.  On Balance Volume is down over the last six months. This is a strong bearish indication  that is usually followed by a downside reversal. Analysis of the rate of change of the exponentially smoothed average price suggests that the current down-trending market is forming a cycle bottom.   This is a strong bullish signal that is usually followed by a movement to the upside.


The new high/new low indicator has reversed to the downside.  This is a reliable bearish signal that  is often followed by an downward price movement. In this market a continued downtrend can be expected.