Market Giving Major Correction Signs

The SP 500 has rallied up into the 1375/77 pivot areas as I had outlined to my subscribers about 10 days ago on the weekend update as possible highs for C wave up from the 1267 SP 500 lows of June. Many forecasters are now getting very bullish, but I continue to see divergences with The Elliott Wave counts and other indicators that are giving me some short term concerns, and then we can determine if these are long term issues still for the markets.

Today’s Independence Day update shows a new chart pointing out prior “Recovery rally highs” since the May 2011 1370 highs on the SP 500. In each case, a major market correction unfolded when we had the NYMOT indicators at these levels along with Stochastics, CCI, and other Fibonacci indicators I incorporate at various times. Currently, we have the NYMOT indicators at a reading of 307. To understand this in context, its the highest reading in the past two years. Higher than the 1292 SP 500 rally high in October 2011 (From 1074) and higher than any other rally high in the past 24 months.

Adding to that, we have the Stochatics indicators at extreme short term highs and the CCI index is nearing the levels it read at the recent 1363 pivot highs. Finally, further puzzle pieces continue to show divergences in the Elliott Wave patterns. The rally from 1267-the current 1375 levels can’t be interpreted in my opinion as a 5 wave rally (which would be bullish), instead its an overlapping 3 wave rally in my views., or a double zig zag. These types of rallies are corrective rallies against a prevailing trend, which was down in to early June.

The rally to 1375 areas is actually in the zone I discussed a few weeks ago, and still in the 1386 or lower Fibonacci zone I’ve outlined as a C wave target for an ABC rally from 1267 June 2012 lows. My work still gives a model of 1422-1267 as 5 waves down, and 1267-current as a zig zag corrective pattern up. The market will soon tip it’s hand I think after this holiday week is over and we see a bit more volume return next week.

With all of this said, it is difficult to be too bearish given the 52 week highs in many blue chip stocks as well as the strong advance-decline lines and recovery in some of the tech stocks of late. When you get a lot of conflicting signals like this, I try to fall back on a variety of indicators and clues to help clear up the clouds of the market.

In conclusion, near term I will be very surprised if at a minimum we do not have significant pullback in the market next week. The rally could sneak a bit higher during this holiday light volume week, so lets look to next week for volumes to return and tell the tale. Taking some gains off the table in the coming 1-2 trading days is probably not a bad move.

By David A. Banister- Chief Strategist The Market Trend Forecast


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CME Group Energy Market Report Recap for July 4th

Is the SP 500 Closing in on a Top?

August crude oil prices traded sharply higher during the US session and climbed to their highest level since May 31st. There were a number of supportive features supporting the advance including, hopes that global central bankers might offer up more stimulus to bolster growth, mounting tensions in Iran and reduced North Sea output. Reports earlier that Iran had successfully test fired mid range missiles was seen contributing to the fear premium in the crude oil market, by raising the threat of supply disruptions.

This comes along with talk that lawmakers were working toward a bill to block oil tanker traffic through the Straits of Hormuz. The oil workers strike in Norway continues and has reduced North Sea production by around 250,000 barrels per day. Further support for the crude oil market might have come on expectations that this week's EIA crude stocks report will show a draw in the range of 2.25 to 2.5 million barrels, which is a bit larger than the five year average draw for this week of the year of 1.1 million barrels.

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Is the SP 500 Closing in on a Top?

Friday’s strong move to the upside caught a lot of traders on the wrong side of the market. Regardless of whether financial pundits refer to it as a short squeeze or simply panic level buying is largely irrelevant. Time and price are always the final arbiters of financial markets. Price on Friday was clearly telling us that too many market participants were shorting equities and the Euro.

The news coming out of the European Summit is what drove prices higher according to most media outlets. However, few traders have actually taken the time to research the fact that Germany has not technically agreed to the European Stability Mechanism legislation at this point.

The German Constitutional Court has delayed the passage of the ESM legislation on the grounds that this court needs to affirm the agreement is constitutional. Several high profile politicians in Germany have allegedly filed multiple law suits surrounding the new ESM law.

Should the German Constitutional Court determine the ESM legislation is unconstitutional a referendum will go before the German people. The last thing the Eurocratic blue bloods and their banking cartel minions want is regular people actually having a say in the outcome of the Eurozone project.

Ultimately the German people do not appear to be in favor of propping up the rest of Europe in exchange for more empty promises of austerity. Furthermore, the German people recognize that they are taking on a massive risk by loaning money to insolvent banks and other Eurozone sovereigns who have not proven to be prudent with managing their current fiscal conditions.

The decision made by the German high court could have a far-reaching impact on the price action in European financial markets as well as in U.S. domestic financial markets. The outcome of the forthcoming decision will carry far more weight than Friday’s June unemployment report. Already I am reading that should the unemployment number come in significantly weaker than expected Ben Bernanke may work to convert Operation Twist into full blown QE III at the next FOMC Meeting.

The addiction to cheap money by large institutional banks will not end until the Fed is no longer able or willing to continue to print money. Should economic data continue to weaken going into earnings season I am sure the banter regarding QE III will increase at lightning pace and bad news for the economy will be good news for stocks. Poor economic data will increase the likelihood for additional liquidity being provided through a 3rd Quantitative Easing initiative.

Leaving the macroeconomic data aside and focusing on market technicals, we find several unsettling situations in a variety of underlying assets and indicators. The warnings are largely falling on deaf ears as the equity bull parade continues. Before we talk about the S&P 500 Index directly, perhaps we should examine some of the indicators and underlying assets that are sending out bearish smoke signals.

The first chart I would draw your attention to is the McClellan Oscillator which is a widely followed and focuses on market breadth as a possible market indicator for tops and bottoms. Note the key high and low points of the Oscillator and how they correspond with the S&P 500 Index.

Read the entire article and see the charts for "Is the SP 500 Closing in on a Top?"

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New Pipeline Project Could Lower Natural Gas Transportation Costs to New York City

Future natural gas transportation costs to New York City could be reduced with the expansion of the existing Texas Eastern Transmission pipeline from Linden, New Jersey to Manhattan, New York (see map above). On May 22, 2012, the Federal Energy Regulatory Commission (FERC), the main jurisdictional authority over the construction of interstate natural gas pipelines in the United States, approved an 800,000 million British thermal unit (MMBtu) per day, or 800,000 dekatherms per day, expansion of the pipeline.

This project is slated to begin service in November 2013 and represents one of the biggest transportation service expansions in the Northeast during the past two decades. The project could have the following effects on the New York City market: reduce reliance on oil fired generators, enhance the reliability of natural gas supplies, and lower transportation costs especially in the winter. Spectra Energy secured firm transportation agreements for this expansion with these customers: Consolidated Edison (170,000 MMBtu per day); Chesapeake Energy Marketing, Inc. (425,250 MMBtu per day); and Statoil Natural Gas LLC (204,750 MMBtu per day).

         

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Gold still at risk of a large downward move before the rally

Gold has been busy consolidating in what I believe will be a 13 Fibonacci month Primary wave 4 correction. The Gold bull market I’ve been following since 2001 is a likely 13 year bull cycle that will end in 2013 or 2014 depending on how you count. This current correction pattern is working off a 34 Fibonacci month rally that took Gold from 681 to 1923 at its ultimate highs. Last fall I warned about the parabolic run likely ending in the 1908 ranges and for investors to position themselves accordingly.

Today we have Gold trading around 1600 and our recent forecast in May was for a rally into Mid June topping around 1620-1650 ranges in US Dollars. The intermediate forecast still calls for a possible drop to 1445-1455 ranges this summer, the same figures I gave out on TheStreet.Com interview last September for a Primary wave 4 low.....Read the entire article and charts.


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CME: Morning Crude Oil Market Report for Tuesday July 3rd

August crude oil prices traded sharply higher during the initial morning hours, supported by hopes for more global central bank intervention to stimulate growth and better than expected Chinese service sector data overnight. Other crude specific fundamentals supporting the morning gain come from the ongoing oil workers strike in Norway that has reduced North Sea output and a growing fear premium in the market in response to reports that Iranian lawmakers have drafted a bill to cut oil tanker traffic in the Straits of Hormuz. Expectations for this week's delayed EIA crude stocks report are for a draw in the range of 2.25 to 2.5 million barrels.

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Exxon May Soar On New Potential In Mexico

Things have been looking great for Exxon Mobil (XOM) lately. Anadarko Petroleum (APC) recently indicated that Exxon may become a partner in Anadarko's Gulf of Mexico operations. Anadarko is already partnered with Plains Exploration & Production Company (PXP) on its deepwater Phobos project in the Gulf, and according to Anadarko Vice President of Investor Relations and Communications, John Colglazier, Exxon may enter the project with up to a 20% working interest, which would reduce Anadarko's interest from 50 to 30%.

In exchange, Anadarko could receive cash and a drilling carry, which would potentially cover the cost of the project's first exploration well. This would be beneficial for Exxon Mobil, and represents just one of the recent successes the company has seen lately. Below, I will show how Exxon's current position within the energy sector makes it a strong investment now.....Looking Deep for Gains

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Iran Drafts Bill to Block Strait of Hormuz

Iran's National Security and Foreign Policy Committee has drafted a bill calling for Iran to try to stop oil tankers from shipping crude through the Strait of Hormuz to countries that support sanctions against it, a committee member said on Monday.


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Looks like we are in good company SDRL

Looks like we are in good company. Most of you know we SeaDrill, ticker SDRL, is one of our COT fund favorites.....

Vanguard Windsor II fund manager Jim Barrow is "nervous" about oil and energy stocks, but is bullish on Seadrill as "the dominant factor" in high tech drill ships. SDRL has the world's newest fleet, Barrow exults: "Their boats rent for more than other people’s do. It is a great company run by Norwegians who know exactly what they are doing."

Adams video update "As we start Q3 is a global slowdown in the cards"

A surprise announcement out of the European summit pushed the market higher on Friday. It was also the end of the week, the end of the month, and the end of the quarter. For Q2 most of the markets were down, including the equity markets. We think that’s an important element to look at. We still believe the trend is down and intact and that Friday was more of a short covering rally.

Now, let’s analyze the major markets and stocks on the move using MarketClub’s Trade Triangle Technology.....Click Here to view today’s video