Hi Everyone!
I wanted to write a quick note to you all before I board my flight to New York City. It's felt like ages since I was last there and it is without question one of the most exciting and inspirational places in the world to visit. Whilst I’m only there for a few days, I will be sure to pay my homage to the symbolic bull statue on Wall Street and ‘wish for good luck’ as I did last in the summer of 2017 (the market rallied 12.5% over the next 6 months!).
Superstitions aside, there is one other ritual that Lex and I always follow before we trade. You guessed it - our Checklist process! Now, I know a number of you have joined us this month as new Trading Club members and MDT students (you can check out the special video I put out this week showing exactly what you get, here), but with the festive period and gifting season round almost upon us, I thought I would share some of our latest checklists below.
First up, is Crude Oil. Readers of the blog will know that we have remained short since our process called the top at the end of September.
It's interesting to note that whilst the score remains negative (-1), it has improved significantly from the -4 / -5 readings in recent months. With WTI testing $50, could we be in line for a technical bounce? (I discuss this in greater detail and provide my conclusion for members in this week’s Trading Club video).
With some of the extreme pessimism perhaps beginning to normalise in crude, it is also interesting to see the anticipated weakness in the US dollar, which is typically inversely correlated to oil. Our Checklist shows a -1 going in to December, which is a reversal from a positive score previously.
The greenback (using the DXY dollar index as a proxy) has in fact already come off since this chart was updated midweek, when it showed an overbought reading on the 60 minute RSI (Relative Strength Index). Nice action confirming our process so far.
It, however, remains up for debate as to whether investors actually want to own risk assets like crude in the current market environment. That is, unless you follow our systematic process to analyse the facts objectively and forgo conjecture often indulged in by less disciplined market participants. As you can see very clearly in our Market Risk Checklist, there is a slight skew supporting risk trades in the coming month, having been negative recently.
And for all the fuss around the business cycle, and whether we are heading towards a global recession, our Business Cycle Checklists suggests that risk markets should be supported by the fundamentals we assess (there are some changes taking place here though, as I discuss in the premium video).
Lets see whether the S&P 500 Index can close above the monthly moving average today to confirm this…
I hope you found this round up useful, and encourage you to check out the special discount on our Million Dollar Traders course and Trading Club if you haven’t already. And for those of you who have, a special welcome to you all again, and to our existing community, I hope to bring back good luck when I see the bull this weekend!
Until next time,
James
James Helliwell | Chief Investment Strategist
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