By: Tom Gentile
on July 20th, 2022
Originally published on July 13th, 2022. Subscribe for early access!
Inflation Rose Again – Now at 41-Year Highs
The Fed has its work cut out for it still.
The markets are being reported having a 70% chance of a full 100-basis point rate hike for July and there is now a chance of a 3/4 of a basis point hike in September.
The Fed is deemed behind the curve by many, so this aggressiveness in the rate hikes, should they happen, be because they are playing catch up.
The CPI: consumer price index rose 9.1% from a year ago, which is above the 8.8% Dow Jones estimate.
The markets opened much lower on the day and trade lower (Dow 30,519 at lows). They tried to go positive on the day, but that was short lived as the market, the Dow, closed down 208-points on the day.
Look at my 52-week Hi and Lo info on the Tools and Observation part of this newsletter.
— Tom Gentile
C1P: Chief 1-Percenter
Four Corners of the Market
SPY traded and closed lower for the fourth straight day.
Today’s price action was a bullish reversal day (for the day itself), but the close is lower than the previous trading day’s close, (a bearish 4-day slide).
The solid, horizontal, green line in the chart image above is at say 375 and that right now looks like a potential support.
The green, dotted line is an ascending support , which see the SPY trading below that today.
A support for SPY can be considered in my/our view at the lows established at close to 360.
Overhead resistance as we see it is still at 390.
We will see If the battle between the nulls and bears keeps this in a trading range between the two or not.
We showed a bit lower resistance line last week so from that perspective it hit resistance already.
If you accept this slightly higher price resistance then you would note it did not need to hit that before rolling over.
The lows on TLT are getting higher like the SPY, the difference between the two is TLT had a bearish reversal day today where the SPY is closing at a 4-day new high.
There are more rate hikes to come which could put more pressure on TLT, and that may happen later in time, but there is no denying at least for a day it looks like the up leg could be over for TLT.
The inverse relation is being seen between bonds and equities with this rollover in TLT and the bit of bullishness going on in SPY, but one thing this market is teaching us is not to get complacent in your view of the direction of the markets.
Last week it was pointed out that the UUP is at 52-week highs.
Today was a bearish reversal day, where the stock opened, traded higher then reversed to the downside and ended up closing lower on the day.
I/we almost always have the candlestick charts in view.
The last two trading days is forming a Bearish Engulfing pattern.
This is formed by a trading day (today), candle body (the red body which is the open and close of the day completely engulfs or is larger than the previous day’s candle body.
This is more significant if the two-day pattern happens at resistance or at a market peak/top.
It gives indication prices in the security may trade lower.
If you look at the Fibonacci chart on USO; an updated one, not the one from last week, you will see USO is closing in on 50% fib retrace over the past 150-days.
USO is also closing in on a horizontal price zone at 72/73, emphasized by the green, horizontal line in the chart image above.
I have another green, dotted line on the chart image above that indicates a descending resistance line from the peak around 92.
The situation to watch for is if USO breaks support on above average volume.
If it does one way to anticipate a future price target lower is take the peak price to the horizontal support price and calculate the price differential.
Then subtract that difference from the price of the breakdown and that may be where the security trades to.
I am not the Gold Bug I once was, and I am glad for that as GLD is at or near lows it hasn’t seen since September of 2021.
From a technical standpoint, if one like to trade or invest off support GLD may be setting up as you like at these price levels.
One technical pattern to keep an eye on is when a stock breaks a support which it did (horizontal, green, dotted line) it occasionally bounces p to test that old support as a new resistance.
The break is new, it happened today, so it may take up to a few days to form that pattern.
If things are deemed bearish or even more bearish for GLD it may not test and keep trending down.
Work with your broker on your collective view tom make a decision.
Tools and Observation: 52-Week High and Low
The CPI number was not great and that is an understatement.
The market, Dow – NASDAQ -SP500 are up off their recent lows, but many feel it is a bear trap and things will roll over again especially if the economy goes into a recession.
Two approaches can be considered.
- Look for stocks that are bucking the down trend and showing Positive Relative Strength but trading at their 52-week highs
- Look at stocks that have been beaten down in price they could be deemed oversold and ripe for an eventual turnaround; stock s at their 52-week lows
The tools have the capability to find securities at both their 52-week high and low.
Go to Stocks > Stock Analysis > Hi/Low
You can select whichever list in the tools you wish but click the dropdown arrow to select and then click Search.
Here is the list as of close of market today: Showing just those at 90% or better of their 52-week high.
The reason again for looking at stock at 90-100% of their 52-week highs is this is a list of stocks that are not getting caught up in the bearishness of the market.
They could be good prospects to invest or trade bullish option’s on – to be determined by you and your broker.
Go to Stocks Stock Analysis > Hi/Low (or stay on this page and switch to stocks with latest close for weeks chosen
Here is the list as of close of market today: Showing just those at 100% of their 52-week low, *there is 186 at 90% or better.
The reason again for looking at stock at 90-100% of their 52-week lows is you’d be looking for turnaround candidates.
They could be good prospects to invest or trade bullish option’s on if you believe in them long-term and believe they are doing or going to do what it takes to fix whatever problems caused them to be down at their current price– to be determined by you and your broker.
— Tom Gentile
C1P: Chief 1-Percenter
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