« May 2017 »

IVolatility Trading Digest™

Volume 17 Issue 21
Sticky 50 [Charts]

Sticky 50 [Charts] - IVolatility Trading Digest™

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After what appeared like the start of a long awaited correction last Wednesday, the S&P 500 Index rebounded to close back above the 50-day moving average, but still below the operative upward sloping trendline. This week's short market review includes charts for the S&P 500 Index followed by two others currently in focus for The US Dollar Index (DX) and WTI Light Sweet Crude Oil (CL).

Review NotesS&P 500 Index (SPX) 2381.73 declined 9.17 points of -.38% for the week after declining 43.64 points last Wednesday triggering some short-term sell signals. By the end of week it recovered to close back above the sticky 50-day moving average just below the upward sloping trendline from the November 4 low at 2083.79 as it attempts to close the pattern gap created last Wednesday.


DollarThe US Dollar Index (DX) & (DXY) 97.03 down 2.10 or -2.12% for the week. Digest Issue 13 "Foremost Indicators [Charts]" included a (DX) chart when it was 99.44 and just above the neckline of a potential of a potential Head & Shoulders Top pattern now with two right shoulders the downside measuring objective at 95 is marked MO in the right corner.


After reaching 103.82 on January 3 the decline helped the 1Q earnings reports of multinationals and may be supporting crude oil and selected other commodities like silver while creating a divergence with the iShares Transportation Average ETF (IYT) and the iShares Russell 2000 ETF (IWM).

DollarWTI Light Sweet Crude Oil (CL) 50.67 basis July futures advanced 2.50 points or +5.195 for the week after testing the 44 lows made last August on May 5 and then rebounding to make a Key Reversal. From the intraday high of 58.15 made January 3 there is a well defined downward sloping trendline, DSTL that will likely contain any further advance although supported by the declining dollar and seasonal strength with the upcoming OPEC and NOPEC meeting scheduled for Thursday expect increasing chatter from about a production cut extension likley creating a "buy the rumor sell the news" event.


From the Disaggregated Commitments of Traders - Options and Futures Combined report as of May 16 "Managed Money," the group that best correlates with crude oil price changes and arguably the most important, increased their net long position 4,063 contracts and increased shorts -11,584 for a net reduction of -7,530 as selling momentum slowed from the previous three weeks, now representing 5.08% of the open interest down from 8.76% on April 25.


The "Managed Money" net long position declined from 15.16% of the open interest on February 21 to 5.08%. The Key Reversal made Friday May 5 after testing the previous August 44 low, suggests short covering after reaching the 44 objective.

Looking at the Producers/Merchants/Processors/Users (PMP) who have been adding more longs than shorts since April 25, added 9,292 more net contracts suggesting little enthusisam for more production hedging at current prices. Here is their declining net short position.


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StrategyIn an impressive display of underlying strength Wednesday's decline abruptly ended the next day, no doubt disappointing those who have been waiting for a correction to increase long positions. With the pattern gap above, the S&P 500 Index will likely continue higher to challenge the previous highs once again thereby favoring long strategies especially those benefitting from a relatively weaker US dollar such as the emerging markets.


With the upcoming OPEC and NOPEC meeting scheduled for Thursday expect increasing chatter from about a production cut extension that could create a "buy the rumor sell the news" event but should also support the S&P 500 Index early in the week as it attempts to fill the pattern gap created by last week's abrupt decline and subsequent rebound.

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Finding Previous Issues and Our Reader Response Request

PreviousIssuesAll previous issues of the Digest can be found by using the small calendar at the top right of the first page of any Digest Issue. Click on any underlined date to see the selected issue. Another source is the Table of Contents link found in the lower right side of the IVolatility Trading Digest section on the home page of our website.

CommentAs usual, we encourage you to let us know what you think about how we are doing and what you would like to see in future issues. Send us your questions or comments, or if you would like us to look at a specific stock, ETF or futures contract, let us know at Support@IVolatility.com or use the blog response at the bottom of the IVolatility Trading Digest™ page on the IVolatility.com website. To receive the Digest by e-mail let us know at Support@IVolatility.com




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IVolatility.com is not a registered investment adviser and does not offer personalized advice specific to the needs and risk profiles of its readers.Nothing contained in this letter constitutes a recommendation to buy or sell any security. Before entering a position check to see how prices compare to those used in the digest, as the prices are likely to change on the next trading day. Our personnel or independent contractors may own positions and/or trade in the securities mentioned. We are not compensated in any way for publishing information about companies in the digest. Make sure to due your fundamental and technical analysis homework along with a realistic evaluation of position size before considering a commitment.

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