By J.C. Parets & All Star Charts
Friday, 7th July, 2023
1/ Big Day for Energy
2/ The Line in the Sand for the S&P 500
3/ The Nifty 50 Posts New All-Time Highs
4/ Feeder Cattle Lose
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1/ Big Day for Energy
Energy stocks are turning up the heat, sitting atop the leaderboard once again.
In fact, energy names could represent the next market area to benefit from the healthy rotation underway.
The Oil Services ETF (OIH) exemplifies our point with authority, gaining almost 7% in today’s session:
It also completed a bearish-to-bullish reversal pattern as the 14-day relative strength index (RSI) confirmed the breakout with an overbought reading above 70.
It is possible that similar buying pressure could spill over into the remainder of the energy space in the coming weeks and months as last year’s leadership group rotates back into the spotlight.
2/ The Line in the Sand for the S&P 500
The S&P 500 is steadily grinding higher this year, up almost 15% year to date.
Price recently reclaimed a critical polarity level, which represents the former highs from last summer. That’s our line in the sand.
The evidence stacks in favor of the bulls as long as the S&P 500 trades above the 4,300 area.
On the flip side, a break below last year’s August pivot high would suggest that bulls still have their work cut out for them. In this scenario, messy for longer likely describes the overall environment for stocks—at least at the index level.
3/ The Nifty 50 Posts New All-Time Highs
Stocks worldwide have been moving steadily higher since the lows from last fall. However, more recently, some countries have slowed their ascent in the face of overhead supply.
Apparently, the India Nifty 50 Index didn’t get the memo, as it keeps pushing against new all-time highs.
As you can see, after carving out a base for the past couple of years, buyers absorbed overhead supply, posting a decisive upside resolution.
The fact that we continue to see this kind of behavior overseas speaks to a healthy risk appetite and supports a bullish outlook for foreign equities in the intermediate and long term.
4/ Feeder Cattle Lose
Livestock contracts remain the undisputed leaders across the commodity space this year. But these unrelenting uptrends are showing signs of exhaustion.
Check out the August contract for Feeder Cattle futures:
The parabolic advance has screamed higher for over six months, challenging its former all-time highs earlier this week.
We believe that those former highs mark a logical area of potential resistance. It also makes sense for feeder cattle to correct lower through price as a four-point bearish divergence on the 14-day RSI suggests waning momentum.
After taking the escalator up, perhaps it’s time for cattle to take the elevator down. If and when livestock drops, we will be monitoring commodities for a possible healthy rotation into energy and base metals.
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Originally posted 7th July 2023
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