The coming week of Aug. 24, 2018, sets up trending pivot math in the Japanese yen, a potential rangebound pivot breakout higher in soybeans, and bulls entering many markets. The S&P 500 appears near highs for next week, but the monthly Camarilla pivot at the 2,867 level seems to make sense to me, so I projected next week’s new high at 2,865 or higher.
U.S. benchmarks are off yesterday’s swing high and the S&P 500 is contained below resistance as the week looks to wind down. Geopolitics remain in the headlines and the White House said it will ramp up sanctions on Turkey after the country hasn’t released the American pastor from house arrest.
The dog days of August that have set in on the moves in the commodities have been exaggerated. While crude oil holds the 200-day moving average, after a major seasonal sell-off, the concerns about a serious demand slowdown are most likely overblown. Turkey, of course, is a major oil producer and Consumer. NOT! The fears of contagion, steaming from the stepped upped pressure from the Trump Administration, has been overdone. We are in the dog days, and oil bears have begun licking their chops, mistaking seasonal weakness for a major bear turn in the market.
Yesterday’s weakness opened the door to a buying opportunity for those who were patiently cautious. Our narrative all week long has been cautiously optimistic; get out of the forest to see the trees, this market is in a strong uptrend. However, we emphasized yesterday the high probability of a washout. Today the S&P and NQ are up, let's call it, 0.5%.
Crude oil prices got slammed on fears surrounding the Turkish economy, ongoing concerns about China, and a big build in crude supply, but really a lot of what is driving the bus is the strong dollar. Not just the traditional inverse relationship that oil has with the dollar, but how this massive up move is impacting oil supply and demand.
A bearish American Petroleum Institute (API) report, as well as the continuing drama surrounding Turkey is raising fears of a slowdown in oil demand based upon fears of raising contagion coming out of Turkey. The oil market that tried to mount a major comeback yesterday was thwarted by a risk aversion in the dollar that sunk oil, as well as industrial and precious metals.
This morning brings a reprieve from turmoil; the Turkish Lira has bounced back as much as 8% before settling in. The story will continue to develop and an agreement to release the American pastor will certainly be favorable for the global risk appetite. While the damage to the world’s currency market has been done, we maintain that it is important to not get stuck in the forest so that you can see the trees; there can be a lot of noise in the headlines, especially during slower summer months.
The crude oil and petroleum markets took a Turkish bath yesterday, but in doing so it may have washed out the bearishness and put in our seasonal low. The moves in the market seemed beyond crazy because at the end of the day the Turkish currency crisis is a much more political than financial crisis. Oil moved on the Organization of the Petroleum Exporting Countries, lowering its demand forecast and fears of a rise in supply, but it was Turkey that cleansed the market.
The coming week of Aug. 13, 2018, sets up trending pivot math concurrent with narrow ranges (means breakouts) in the S&P 500 (countertrend bounce & maybe down), Japanese yen, Crude oil, and gold (extreme narrow range block/rectangle on daily chart). The Eurodollar has already made 5 easily-countable down-waves (Monthly chart) since the swing top I identified in advance months ago, and it has sideways pivots for this week but extreme trending monthly pivots into Sept.