CRUDE OIL OVER VALUED IS IT A TOP?
I mentioned recently that I was bearish in the energy sector and missed the move down in RB that followed unfortunately. Please see the memo about how I don't catch every move. The above chart is Crude Oil with a valuation measure against the US Dollar. If you look at the recent times where we got over valued we either got a pause or a decline. We have not as of yet seen that happen. Is it coming?
What bothers me about this current situation is that the valuation has stayed pegged in the over valued zone for a while now. If you look at the prior occurrences you can quickly notice they got into the zone and quickly exited that zone. This is similar to the situations where the commercials hedge a huge trend move and stay on the wrong side of it for months and the price keeps going. In general it would be best for an exit of the zone and re-entry or a divergence of some type to occur. Just being in a over valued zone is not an automatic sell the farm and take a position situation. It is more of an awareness that we have reached a stage where a reversal could happen. Timing the entries is entirely different.
When a market is running like this or for that matter the ES right here, stepping in front of these moves can be dangerous. I do not make it a habit of trying to pick a top in price moves like this. I am getting fundamental warnings like this valuation condition as well as Sentiment, which tell me to be on the lookout for a trend change. There has not been one yet.
The buy every intra-day dip trade appears to be back on the table, welcome back Kotter!
This is a 5 minute chart of the ES today and don't jump to any conclusions about the valuation tool, it is worthless for day trading. You can see it stayed buried in the zones 3 times in a row and was only right after several stops and starts except the very last time, where a nice buy took place. The point of showing the chart is just to show how what once again appeared to be a good down day setting up was quickly reversed and turned green. This is how bull markets act. I am not announcing anything that most people don't already know. This also does not mean we can't go down. What it means is the probabilities favor buying the dips until we get a significant break.
We had a couple of trades on today that were doing very well until this happened but everything keys of the ES now so when these big reversals happen often markets will react to them. We wound up making some money but less than half of what we had, oh well that is trading. This is why watching intra-day swings is too stressful and I don't do it. It may be tempting to stare down a 5 minute chart all day, but until you can find someone who shows you his account statements showing how much money he is making trading 5 minute charts, don't believe a word of it.
My short term indicators are becoming a bit more neutral now so the bias I had to the down side on the short term has become more neutral.
I am flat at the moment and don't see anything jumping out at me for tomorrow for the moment.