Tom’s Weekly Newsletter July 27th, 2022

Originally published on July 20th, 2022. Subscribe for early access!

Rising Jobless Claims Reported July 21, 2022

Non-farm payrolls showed and increase of 7.000 from a week before, coming in at 251.000.

This exceeded the Dow Jones estimates of 240,000, whicb is the highest weekly level since mid-November.

This number is a sign the jobs market, which was deemed on fire in 202. Is cooling off this year or has at least started to.

Rule-of-Thumb Definition of what a Recession Is

That definition of a recession is two consecutive quarters of negative growth

GDP (Gross Domestic Product) fell 1.6% in the first quarter.  It looks like it is  on track to decline another 1.6% in Q2; this is according to the Atlanta Fed.

All Eyes on the Fed Next Week

Next week the Fed is expected to raise interest rates another 0.75 percentage point, and some are even talking of it being raised a full point.

A 0.75 hike will take benchmark overnight borrowing rates up to a range of 2.25%-2.5%.

The market rally off its mid-June lows is still intact for now, likely fueled bu a rotation into tech, but be minfdul we are still in a bearish market for the year overall.

Four Corners of the Market

A lot of this rally off the mid-June lows is being attributed to the rotation back in to tech.

This is one reason the S&P 500 is considered a much better index to use when assessing what is going on in the overall market.

It has 500 stock vs. only 30 in the Dow Jones Industrial Average, which picks up so many more stock in a much more varied batch of sectors and industries.

SPY, for now, has cleared the 390 resistance for three consecutive closes.

The lows have gotten higher, which is also bullish and now it seems the next possible overhead price that may cause a stall or hesitation is where it would fill a gap from just above 400.

TLT is in a symmetrical triangle formation.

It doesn’t have much else to do from a consolidation stand point as it is at its pinched as tight as it looks like it could be.

This leaves an anticipated break from the triangle to give us an indication of possible future direction.

If TLT, which is my representation for bonds and bonds trade inverse to equities AND equities are in a bit of a bullish rally off their mid-June lows that would tell me to expect TLT to break down out of the triangle.

We do have the Fed next week and the expectations are for it to raise at least 0.75 basis points so that may cause a drop in TLT, but the markets haven’t necessarily been that easy to project so we have to wait and see.

TLT is so overbought maybe some bargains shoppers step in here. This isn’t a market call of what will happen, but more of a talking out loud.

This is a Fibonacci view of USO.

50 nor 50% has anything to do with the Fibonacci sequence, but 50% is such a widely used and popular percentage used by technicians it is found many times in the use of Fibonacci tools on different software packages that have Fibonacci charting capabilities.

USO retraced 50% of the range shown in the image above and it did bounce a little bit, but it hasn’t truly spring boarded up off it to a significant degree.

It looks like it is trading in a sideways or box range. It is near its resistance of the range which may mean it continues to trade in a repeatable pattern between support and resistance, unless or until it doesn’t.

There isn’t much to say about GLD.

And what there is to say is obvious if you look at its chart.

It’s in a bearish trend. What looks to be a strong bearish trend.

If you extend the number of days in view looking for an old support area that may be a place GLD retraces to as new resistance you have to look up to the price 166-167 and that doesn’t look like it is in the cards of GLD at least not any time soon.

There are Darknet patterns / signals that pop up in the chart view above. 

Even in downtrends Darknet signals can appear, but expectations for them working have to have short time frame expectancies as any bounces from them on GLD aren’t that big nor do they last long.

Tools and Observation: Darknet

Its been awhile since we highlighted a case study based off Darknet so let’s do so at least while the markets are bouncing off their mid-June lows.

Darknet is a scan at the Contrarian level subscription.

Darknet looks for securities, stock, or ETF’s whose price is at a place on the chart where it may see a bounce higher in price.

That place on the chart is when three separate channels are stacked on top of each other (you may hear me use the term to describe this as a triple stack compression) and the price of that security is at the support of the three of them.

It does not extrapolate how far higher it will bounce nor by what amount of time to come it will take place. What we have found is they usually play out over 20-30 trading days.

What our tools do along with finding the technical signal and pointing it out on the chart when one runs the scan is it will go and find out what option in its chain has the lowest percent to double at least out as far as that 20-30 days.

That list also shows up on the Darknet scan page so you can see the options for each security with a Darknet signal right now.

To go to Darknet click on the Darknet Signal icon or go to Home > Darknet Signals. Below is an image example of that page:

The info below that shows the scan criteria

First note the orange circled How it Works button. Clicking that takes you to an extensive help file to better understand the scan, the page and all you can do here.

There are video in the TTR library as well that put this education in a video format for those the learn better from a visual manner.

Leave everything as is except for the Trade Type Displayed, (boxed in green). 

Click on that dropdown window to left click on the line-item Call Option Trades.

Then click on Search.

There are days you get a slate of candidates and there are days like today where you get 1 (or even somedays none).

Today’s result is showing NRG Energy (NYSE: NRG)

You can click on the ticker and bring up a chart with the Darknet signals on them.

You may or may not have moving averages on your chart (go to your chart page to turn them off if you don’t want them).

The ‘B’ Bullish signal is populated on the chart.

On the data table it also sorts the securities with Darknet signals by the ones whose option the tools found with a percent to double calculation is the lowest (to highest). Yellow highlighted column far left.

You can left click the green hyper link Call Option Trade from that table and open up the Risk Graph Page for that option.

— Tom Gentile
C1P: Chief 1-Percenter