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Morning Market Outlook 05132024

Hello, everyone, and welcome to Monday morning. It’s Stephen Whiteside here from Well, it’s the day after Mother’s Day, and that usually has a bullish bias to it. And so far, stock index futures are trading above fair value. Commodities are mixed with gold down about $30 in the pre market, while crude oil and natural gas are up slightly on Monday morning. Let’s start off looking at a weekly chart of the VIX. And we’re on our second weekly sell signal here and will remain long term bullish on the market as long as the VIX does not close above 16.86 this coming Friday at 04:00 p.m. Now looking at a daily chart of the VIX. If you’re a short term trader, you can remain bullish on Monday. The VIX made a new low on Friday, and coming into Monday, our upper channel line is up there at 14.77. And if we don’t close, close above that on Monday, that upper channel line is going to continue to move lower daily. Now, just a heads up, the VIX has come down to an area where it’s found support before. That does not mean the VIX is going to turn around on a dime.

We may stay down at this level for who knows how long. It’s obviously a place where options traders feel comfortable. It’s essentially fair value for options, and so we could be down at this level for quite a while. And the stock market remains positive. We’re not looking for a low in the VIX as a sign of anything. What we’re looking for is upward momentum in the VIX that generates a buy signal. That’s what we’re looking for. The fact that we’re down here and we’re trading sideways, we’re treading water. We don’t make lower lows. That’s not a sign of anything. Options traders seem very comfortable about the future of the stock market at the moment, and that’s the only thing we can gleam from this. And of course, the first thing we’ll be looking for is a breakout to the upside. That’ll be the first warning sign that the stock market may be about to head lower. So don’t be concerned about the VIX making a new low or struggling to make lower lows at this point. That’s not a sign of anything. We’re looking for a buy signal, and we’re certainly not seeing that on Monday morning.

Now moving on to the major indices, the Dow is back on a weekly buy signal as of Friday’s close. Looking at a daily chart of the Dow Diamonds, you can see we had a really powerful week last week and we moved right back up towards the highs from back in March. Our next mathematical target is $398.44. That’s where we topped out back in March. So we’ll be looking to see what the market does at that level and see if it can punch through and head up towards $400. And then $406.25 would be our next targets. Above that, the SPY is back on a buy signal as of Friday’s close. You can see the nice run it had last week heading back up towards the previous highs. Now, our next mathematical target is $531.25, but you can see we stopped out at $524.61 back in March. And so that will be our next target. We’re getting pretty close to that coming into Monday. We’re just a few dollars away from that. Now, looking at the Nasdaq 100, it barely generated a weekly buy signal on Friday. And you can see the week we had last week for the triple Q’S.

Our next mathematical target is $445.31. We got as high as $444.31 on Friday. And then the recent high was up there at $449.34. If we can take that out, that should take us up to $453.13, which is the top of our projected range on the daily charts. But of course not on the weekly charts. Now, it’s interesting to note that the equal weighted Nasdaq and the next generation Nasdaq stocks have not gotten back on a buy signal yet. So that tells us it’s those big cap tech stocks that we’ve been following are the reason that the triple Q’s generated a weekly buy signal and the other major indices did not. Now, looking at the canadian market, there’s the ishares for the TSX 60 making a new high last week. And as you can see, while the US market did see some weakness previously, over the past month, the Canadian market saw weakness, but not enough to generate a weekly sell signal. That has a lot to do with just a couple of sectors and we’ll look at those in a second. We had a bearish reversal day on Friday, but didn’t close below the previous days low after making a new high on Friday.

So a little selling going into the weekend. Our next target on the daily charts is 34.38, and we may get to hit that this week. Now, what’s been working for the TSX, as opposed to the US market, of course, has been commodities. The best performing sector so far this year is the gold sector, up 23.55%. And then we’ve got energy up 22.26% so far this year. Last week was an inside week for the energy sector. If we look at the top performing stocks on the TSX 60 so far this year, you can see it’s heavily weighted in commodity related stocks. You’ve got mining, mining, energy, mining, energy, energy, mining. So as you can see, it’s been all about commodities in 2024. What hasn’t worked? Well, the telecom stocks are still down on the year, 8.24%. And then we’ve got information technology stocks down 3.59%. Now, the biggest loser on the TSX 60 so far this year is Open Text, down over 25%, followed by Shopify, down nearly 22% so far this year. And you can see most of those losses came in the last week. Let’s finish off this morning’s presentation, taking a look at the world of commodities.

And we’ve got crude oil on its second week of a weekly sell signal. We were up slightly on the week, $.48 and change, so no major trend there. As you can see, the pros are starting to give up control on a weekly basis. $75 should act as support. If that breaks, then $68.75 would be our next target. Moving over to the daily chart, you can see the pros did give up control on a short term basis. We had a bullish reversal day on Wednesday and so far we’re holding that. We haven’t broken that low just yet. Looking up, we need a close on Monday above $80.31 to give us a new daily buy signal for crude oil. Looking at natural gas, we’re looking for a weekly close above $2.58. We are on a daily buy signal and I suggested people wave that off until we got at least a midterm buy signal. So the midterm buy signal, the weekly buy signal, looks like they’re going to come in at the same spot. And so far that hasn’t happened just yet. So we have had several short term buy signals in natural gas that faded fairly quickly.

And I’m not sure if this is going to be another one right now, but I want to give the market a little more breathing room before I jump in with both feet. Let’s finish off looking at the mining sector. And copper made a new high for this move last week. Looking at a weekly chart here. We’re stuck up here at $468.75. If we can start breaking out above that, then that takes us up to $500 and that is certainly doable. We were there back in early 2023 looking at who’s in control, the pros certainly look like they still want to be very bullish on copper. Looking at a daily chart of copper, we did trade down to the lower channel line for a few days, but did not close below it on Monday, we’re looking for a close below $451.35 to give us a new daily sell signal for copper. Looking at the price of gold, it ended the week up $68.40. It’s down 28 $30 in the pre market this morning. That’s certainly not enough to scare anybody. We’re trying to get up to $2,500 if we can take out the recent high from a month ago.

Looking at who’s in control on the daily charts, the pros gave up control. We had short term sell signal. We came back on a buy signal on Friday. So on Friday we were up $34.70. This morning we’re down about $30 last time I checked. So that would not be enough to give us a new daily sell signal. So if you’re bullish on gold, getting in at the open on Monday might be a good thing, as long as you’re willing to get out on a daily close below $2,312.90. Looking at the price of silver, silver had a nice big up week last week, up nearly 7% on the week. We tapped the $29.69 level a month ago and we’re looking to see if we can take that out. Of course, the next psychological target would be $30 and if we can take that out, then $31.25 would come into play. We are stuck in a range here. We’ve traded up to $29.69, traded down to $26.56. That’s where 90% of our trading activity has been since the start of April. Now we’re looking to see if we can break out or break down outside of that trading range coming into Monday’s trading action.

If you’re trading silver futures contracts, we would be sellers if we close below $27.10 on Monday. Not expecting that to happen from what we’re seeing in the premarket on Monday morning. Okay folks, that is all for this morning’s presentation. Have a wonderful day. Next time you’ll hear my voice is on Tuesday morning.

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Stephen Whiteside
Monday, May 13, 2024

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