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RoboStreet – June 23, 2022
The Rolling Correction Hits Commodities
With every major market correction, there is rarely a time in history where each sector of the market didn’t go through its own specific bout of heavy selling. After outperforming year-to-date, energy and agriculture stocks are getting trounced, pulling back 20%+ in the span of just a few days. WTI crude rallied to $122/bbl on June 8, only to see it slide back to under $105/bbl as of yesterday.
The same can be said for natural gas, wheat, corn, soybean, and fertilizer. These and other key commodities are under extreme selling pressure as the narrative of deteriorating macroeconomic conditions takes a firm grip on investor sentiment. Fed Chair Jerome Powell reiterated his hawkish rhetoric for a second day on Capitol Hill, which the market fully bought into as bond yields fell for a third straight session.
Based on the price action of this week, commodity inflation peaked for now. It doesn’t mean there could be another round of higher prices, as that is always a possibility with a disruption in oil and gas production or drought conditions in America’s farmlands. But at present, the June inflation data should show a decline from that of May. One week doesn’t make for an intermediate-term trend, the prices are moving in the right direction.
And remember we’re not talking about day-trading here. I’m looking for 50-100% gains inside the next 3 months, so my weekly updates are timely enough for you to act.
As of Wednesday, the $SPY closed lower 0.2%, at $375, below the key long-term support – $380. The value/reflationary ($VTV) closed lower 0.2%, at $131, right above the 52 weeks low. The technology sector ($QQQ) closed lower 0.2%, at $281, right above the long-term support level.
The $DXY closed lower, near the $104.0 level, trading below the December 2016 high. The $TLT closed higher 2.7%, at $113, and facing the key long-term resistance. The ten-year yield closed lower at 3.15%, below the key short-term support. The $VIX closed lower, near the 29 level.
The $SPY short-term support level is at $364 followed by $350. The SPY overhead resistance is at $383 and then $396.
I would be a seller into the rally and have NEUTRAL portfolio at this time. Short-term the market is oversold, and undergoing the bottoming process.
If you are trading options consider selling premium with September and October expiration dates.
Based on our models, the market (SPY) will trade in the range between $350 and $420 for the next 2-8 weeks.
The stock market is trying to put together a winning week, which would be the second up week in the past twelve. The bulls need a win and they are getting some cooperation out of the software sector that is being big higher and leading all sectors along with big cap pharmaceutical stocks. Grant it the move higher is nominal, but just to see some bargain hunting is encouraging.
One of the most important indicators to be watching is Treasury yields. Their prices are also moving in the right direction – higher. If the bond market can determine where the Fed will be done raising rates, then Treasury yields won’t rise much above current levels. Markets tend to be self-correcting when there is too much of anything, and the spike in rates during May and early June negatively impacted the housing market and retail sales.
To this point, shares of iShares 20+ Year Treasury Bond Yield ETF (TLT) are back on the upswing as rates decline and have penetrated the first overhead level of resistance at the 20 DMA with the 50 DMA just overhead at $117. the 20 DMA with the 50 DMA just overhead at $117. If the market starts to buy in further that just maybe inflation has peaked and a harder landing is in store, then it stands to reason yields will pull back further, pushing shares of TLT higher.
When we apply our AI-powered algorithmic Forecast Toolbox to TLT we get a very powerful upside Predicted Resistance price target of $172.92, assuming the economic scenario I just laid out comes to be reality. Considering that TLT is trading at just above $113, a move to $172 over the next few months would almost be the equivalent of owning a stock like Tesla in its heyday.
This is what the power of AI does for us and for members of our RoboInvestor stock and ETF advisory service. Our proprietary AI platform identifies trades with a high probability of profits and cuts out all the noise and emotion that typically drives investor behavior. We email subscribers an online newsletter every other week, over the weekend, that includes my fundamental commentary on the market landscape, a technical read on near-term market direction, an update on current positions, and one or two new recommendations to act on when the market opens Monday.
RoboInvesetor is an unrestricted investment service, in that I may recommend blue-chip stocks or ETFs that represent the major indexes, market sectors, sub-sectors, commodities, currencies, interest rates, volatility, and shorting opportunities through the use of inverse ETFs. Our model portfolio will hold between 12 and 25 positions, depending on market conditions. Lately, we’ve been entirely more cautious with a smaller number of stocks and ETFs.
To my knowledge, our track record of the very best in the retail advisory industry, where our Winning Trades Percentage is at 88.85% going back to April 2018.
The market is about as unpredictable today as I’ve seen since the pandemic broke out in early 2020. Inflation, the Fed, China lockdowns, and the Ukraine war – all factor into how money is being made and lost. Don’t go it alone in this investing landscape, but instead, put RoboInvestor to work today and add a big layer of confidence to your portfolio going into tomorrow. We’ll be with you every step of the way!
And remember we’re not talking about day-trading here. I’m looking for 50-100% gains inside the next 3 months, so my weekly updates are timely enough for you to act.
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