Riding high, time for a correction?

[786Trader]

Trading gasoline and oil has been pretty epic this year, so far. The happy nexus (for Bulls) of constrained supply and increased demand have conspired to push prices ever higher, popping targets and passing  milestones on the way.  There have been some pull backs , but most of those were due to some healthy profit taking, others due to ill winds blowing a supertanker off course and blocking the Suez for a week or other such unforeseen, but welcome (for bulls) circumstances.  However, as most of us with experience know that this too shall pass and inevitable corrections  are due to manifest whether it is our want or not. It's a cyclic phenomena.  Thing is, to be prepared for such eventualities one must start hedging one's positions accordingly. Or even reverse them entirely. 

One may suggest that a change in the wind or sea is due. Not in a "it's all going to fall, sell it all " kind of way, but more ;"it's been hot and sunny too long and we really need some rain". All I am suggesting is, it might be time to invest in a brolly and some Wellington boots, if one is trading Oil or Gasoline, or commodities in general. What rationale sets me on this course of action? Apart from bigger-than-it-should-be gut instinct, supply and technical chart action suggests a top is near or near abouts. Not to mention many traders have already blown their targets out of the water and could do with a holiday. Sell high, come back and buy at a decent discount and presto, lets dance again sort of correction.

I could easily be mistaken and am still overall bullish on Oil and Gasoline, but sense a  decent ($7-$10) correction is due by months end or thereabouts. Maybe the eclipse has set me off on a fools errand? However, I have always come to rue not listening to my gut and can scent the winds of change, so am planning on changing strategy in the meantime, moderating and shifting positions accordingly. Maybe it's soon time to buy some Gold or Silver ETFs  or buy some QQQ shorts or just pick up the Vix at 20, for example and trade out when the targets have popped. Don't get me wrong, this is not an end is nigh kind of feeling, more a "we've maybe only got a few more weeks of this, before the clouds break" sort of feeling. After the rains there is a sense of renewal and I wouldn't be surprised if the Rodeo starts out all over again with the same associated vim and gusto, with just a few folk who were slow or arrogant or plain vanilla flavoured dumb,or leveraged to the max, wiped out by the sudden change in the proverbial commodity trading weather.

Either way I wish all traders on the forum good fortune and timing and good health.

[786Trader]

Regards price points... am long on Brent with a target at $77.86 (suspect higher) once this is in, will look to cover positions on Oil and gasoline and look to take some insurance now with Vix@20 Gold and QQQ shorts as strongly suspect short term reversals will be due to unfold anytime subsequent or even before. 

[HMB]

probably missing the point, but I don't get the growth stocks (QQQ) short to hedge against correction in cyclical commodities, sorry.  NDX went nowhere since mid Feb, while oil is up 20% or so.  That doesn't mean tech is cheap, nor that QQQ would rise (again...) when cyclicals crash.  but hasn't the narrative been reflation-rotation for a while...?  if that simply unwinds - QQQ obviously will outperform.  on the other hand, in case of a general risk-off, with multiple compression in the center, you'll do very well.  Personally, I see too much risk of NDX catching up first.  next week expiry date - not that I would have much data on these things, but wouldn't be the first time that range breakouts come just in time, almost like manipulationgic...  

 

 

Edited June 10, 2021 by HMB

[THT]

Fed meeting this week

Markets still Bullish, But..............

Lots of factors are in place that occur at tops/highs

1. Time Cycle zone - rising market into it usually tops out for a half decent correction of some degree (However of all the TC's I track this one is the least predictable in an overall Bull market - Reference 15th May 2012 for the last Internal date this TC arrived) 
2. Weekly Indicators are in the OB zone and in perfect place for reversing for the weekly chart to register lower price bars of some degree
3. Daily Chart (shown) - possible Double top + daily Indicators in OB zone

There's also an Elliott Wave count suggesting a 5 wave top due - not too bothered about this though

IF a correction happens, then its a great buying opp, but as of yet there's no evidence the bull runs finished

I've got an aggressive exploratory short 1 penny under the black line (yet to be triggered) - SP500 Index

Got a nice Triple TOP formed on the Nasdaq100

* Note on TC's - Sometimes they arrive dead to the day, other times a window of tolerance has to be observed - we're NOT trading the TC, we're trading the price action caused by the TC, which should form formations relevant to the direction of price or likely direction and the TC's are NOT 100% accurate, they are highly accurate but not 100% which means some of them won't work out as expected, hence why we don't trade them blindly

[786Trader]

Don't think the bull run has ended, just a correction is very much on the cards. Timing of which suggests we have some room to manoeuvre but would not be surprised at all if the market tops out within the next couple of weeks, or anytime around 21/06....Suggest it is more a profit taking exercise than genuine full scale correction, which could/should be later in the year. Only mentioned this as markets have been red hot for months and swimming in liquidity, sooner or later some of that will be taken out in the form of profit taking. Suggest it may be a 10% er or even more. In the past have purchased  ETFs that short the market and like to buy the Vix at less than 20, as it's a fair form of insurance (Imho). Psychologically, the oil markets have a problem with WTI being over the $75, which at current rates of progress is due to top out sooner than later. Just mentioning it. 

[THT]

16 minutes ago, 786Trader said:

Don't think the bull run has ended, just a correction is very much on the cards. Timing of which suggests we have some room to manoeuvre but would not be surprised at all if the market tops out within the next couple of weeks, or anytime around 21/06....Suggest it is more a profit taking exercise than genuine full scale correction, which could/should be later in the year. Only mentioned this as markets have been red hot for months and swimming in liquidity, sooner or later some of that will be taken out in the form of profit taking. Suggest it may be a 10% er or even more. In the past have purchased  ETFs that short the market and like to buy the Vix at less than 20, as it's a fair form of insurance (Imho). Psychologically, the oil markets have a problem with WTI being over the $75, which at current rates of progress is due to top out sooner than later. Just mentioning it. 

Yep - If the major cycle working out since 2016 repeats as its done for the past 225 years then the USA Indices are UP, UP,UP until the mid 2030's - corrections will be nothing like 2000-2009 corrections 

Although chart is up to date - I wrote the below pre 2015 (can't remember exactly when) - as an absolute min I'd expect 22-25,000 for the SP500 to end on in 2034

[RFSmithers]

Many soft commodities have had a nice run also...I think in general all markets are doing decent.

[786Trader]

On 14/06/2021 at 12:18, THT said:

Yep - If the major cycle working out since 2016 repeats as its done for the past 225 years then the USA Indices are UP, UP,UP until the mid 2030's - corrections will be nothing like 2000-2009 corrections 

Although chart is up to date - I wrote the below pre 2015 (can't remember exactly when) - as an absolute min I'd expect 22-25,000 for the SP500 to end on in 2034

Suspect corrections when they come will be in the order of 10-20%. We may have 2 such corrections by the end of the year. Suspect one is due around now. Chart action suggests overbought for equity and commodities are correcting as I write. Recovery is also highly likely. Re Oil, correction will not be long lasting. May I suggest the price of energy will remain high for the foreseeable future (return of $100-125 barrell ?). As will the spectre of inflation, as contrary to the esteemed Jerome P, I maintain inflation is more than "transitory", more a feature of the next few years. 

Pretty optimistic predictions for S&P 500 there, as there is an inevitability of a significant correction of more than 34-55% by 2025-26. However, am prepared to work with a guide that suggests equity will relentlessly rise for the next Gann cycle. 

[THT]

23 minutes ago, 786Trader said:

Suspect corrections when they come will be in the order of 10-20%. We may have 2 such corrections by the end of the year. Suspect one is due around now. Chart action suggests overbought for equity and commodities are correcting as I write. Recovery is also highly likely. Re Oil, correction will not be long lasting. May I suggest the price of energy will remain high for the foreseeable future (return of $100-125 barrell ?). As will the spectre of inflation, as contrary to the esteemed Jerome P, I maintain inflation is more than "transitory", more a feature of the next few years. 

Pretty optimistic predictions for S&P 500 there, as there is an inevitability of a significant correction of more than 34-55% by 2025-26. However, am prepared to work with a guide that suggests equity will relentlessly rise for the next Gann cycle. 

Re Inflation - If you look at the last time Int rates were depressed for a long time was 1929-1951 (2% ish) 22 yr period - this covered the 1929 crash and world war 2

The stock market cycle that landed 2000 was the same as per 1929 - dow crashed 80% in 1929-1932, Nasdaq100 same in 2000-2003, hence the same chart price formation 

At that time Int rates were slashed to combat deflationary pressures - in both cycle periods - IF and its always an IF because we don't know for certainty, since 2000 that 22 yr low Int rate cycle has repeated then we are getting pretty darn close to it ending, this has been on my radar since 2012 - time will tell but I think on the Time Cycle thread i posted about the 4 year cycle in soft commodities which is expected to arrive next year too, so I can see all the factors for inflationary raring off building already, as governments and central banks are always reactive and behind the curve, it would not surprise me to see oil up there as you say forcing central banks to lift int rates to "combat inflation" 

I've long called 2021/22 for Int rate rise - be interesting to see what happens if anything

SP500/USA markets - "should" if it follows the past 225 years of sequencing - obviously this needs to be monitored along the way, but if it does, SP500/Nasdaq etc top out 2034 for the next 17 yr deflationary cycle to begin

Big corrections = great buying opps