Seasonally, WTI oil can be choppy into February. True to form, WTI has been trading sideways in a tight range since it broke out from a major point of technical resistance last November. Since that breakout, WTI crude seems to be trading in a range between $51 and $54.50. Daily momentum and moneyflow are trending down- as marked on the chart. This shouldn’t surprise anyone given the seasonal tendencies for chop mentioned above, and it shouldn’t discourage us from looking for a buying point in oil shortly. Ideally, one would buy oil and oil-related equities upon a breakout through $55, and a hook up on momentum. Or – one could leg in with part of their allocated capital if oil pulls back to around $51 – and then wait to allocate the other part of their capital upon a breakout. I’m open to either strategy in the coming weeks.
As an aside, I’m just heading back from a cycling trip in Florida, and I must say that there is a certain amount of positive vibration surrounding the Trump election down here. Whether that confidence in the economy is well founded or not will be proven or disproven over the coming year or two. In the short run, that confidence should be reflected in another factor to buoy US markets and the greenback, all other factors being equal.
Thanks for sharing your strategies on oil. Any thoughts on the broader s&p market, it seems to be breaking to new highs but the $vix is near single digits! This is a strange situation. Are there other sentiment indicators that are flashing warnings right now, in particular what does the smart/dumb moneyflow look like at the moment?
Ron – the smart/dumb money indicator is clearly in the danger zone. Smart money is only about 20% confident, while dumb money is about 70% confident. That kind of differential can often lead into some short termed weakness.
Thx Keith, good to know. I’m going to use your 3 day rule on this S&P break out before making any decisions. That will also allow me to see the weekly data over the weekend. Cheers.
Thank you for the great blog with useful analysis!
At a christmas party, someone told me of a split share fund DGS on the TSE. What are your thoughts on the Class A shares to hold for income in TFSA and RRSP. They are a product with higher monthly income comprised of a covered call overlay, dividend return and return of capital. It currently has a 14% yield which sounds too good to be true?!
Would love to hear your opinion.
Sauraby–I typically avoid doing opinions on individual securities for investors on this blog for a few reasons–first, I would need the “Know Your Client” diligence on you, next, I would have to research this security – which I have never run across before- in order to provide opinion–and lastly–I try not to get into the habit of providing individual stock opinions – given the time it would take away from my full time work as a portfolio manager.
However, you might want to try calling into BNN on a market call show–the guests on the show do answer such questions live on the show.
Great. Thank you so much.
BTW–you can also try “stockchase” –it summarizes opinions of BNN guests on stocks–just type in the symbol on their website and you get access to all of the comments on the stock
What are your views of the TSX right now? Short term there appears to be a divergence between price and RSI and MACD.
Its overbought, hitting 13 year resistance, and oil may peel back $2 or so in the nearterm (potential buying time if so)–so I am of the same opinion with the TSX as the S&P500–nearteremded correction time likely here or approaching.
Where do you think we are in oil now Keith? Seasonality does not seem to be happening so far.
I’m going to post a blog on the topic today!