Key Takeaways
- Friday’s Nonfarm Payroll data resulted in Equity weakness, which follows a trend of six consecutive reports, which wasn’t surprising but proved to be a non-event
- Equities largely drifted sideways this week resulting in no change of the current uptrend
- Gasoline prices are stretched technically, and cycles indicate late year weakness. Most DeMark tools haven’t confirmed any change of trend and peaks look early
Yet again, with most eyes on inflation and labor markets, Friday’s robust Nonfarm Payroll report might have some thinking yet again that the phrase “Good news is bad news” is back in play. However, Friday’s pullback barely scratched the surface in erasing any of the technical progress achieved since the 5/20 low. This daily chart below helps puts our weekly decline into perspective for those wondering how this recent uptick in volatility might be affecting the current trend. Prices have largely grinded sideways after the very sharp gains seen last week. 4071-4 is an area marking lows this past week, so this is an initial area to concentrate on. However, even on a break of this, it would prove short-lived, likely not undercutting 3982. Meanwhile, 4177 from Thursday is important on the upside and it’s expected that next week drives prices over this level, up to near 4300. Bottom line, Friday’s selloff is a non-event.
S&P hourly chart is even more helpful for those seeking to understand short-term trends
Following the early morning selloff, prices largely have moved sideways for the last few hours, and this uptrend connecting lows over the last couple weeks shows why this area is important. As can be seen, price trends drawn from 5/20 lows have been touched at least three times, the latest being today, but have not been broken.
Given the choppy nature of this consolidation this week, breaking this week’s lows near 4071-4 in SPX cash and Futures lows made Wednesday and Thursday would be an initial sign that selloffs might last a bit longer. Yet, from an Elliott-wave perspective, this would simply prove temporary and short-lived given the current bullish structure. It’s thought that weakness into early next week should be buyable for a push higher into June’s FOMC meeting.
Sentiment seems to have ticked up a bit given last week’s surge
Just in the last couple weeks, we’ve seen bearish sentiment evaporate a bit when just eyeing the AAII poll data. Bears still outweigh Bulls, but this spread has decreased to just 5 points with Bearish polling at 37% vs. Bulls at 32%. This isn’t surprising given SPX rose nearly 9.5% from 5/20’s trough to yesterday’s peak.
However, CFTC data for Equities this past week shows more sellers than buyers, with SPX futures showing -27k in SPX Futures. They also sold modest amounts of NDX (8.1k), Dow (2k), and Russell (3.9k) futures, with the short there the largest since August 2019. (Bloomberg)
It’s thought that further rallies into June FOMC would help sentiment likely turn more positive. However, for my purposes, sentiment is normally more relevant at extremes and also in choppy markets then huge bull or bear markets where trends and sentiment can persist without immediately changing.
When should gas prices peak?
With driving season getting underway as summer approaches, the one question most are pondering is whether the ever-escalating prices in Gasoline will persist. Monthly Symbolik charts show our April breakout above prior peaks made back in 2008 which has driven this wild parabolic rise in recent months. One-month gains have now exceeded 25% while year-to-date gains are now more than 88%. Important to note that the last major peaks seen in RBOB Gasoline both coincided with monthly DeMark exhaustion signals, the first being 2008 and the second during the multi-year peaks seen from 2012-4.
At present, there is one monthly TD Combo sell signal which is unconfirmed. Additionally, the Setup count shows a 7 count (out of 9) and Monthly TD Sequential shows a 10 count (out of 13)
Thus, monthly charts generally show that two to three more months of gains (if uninterrupted) would finally bring about the potential for prices to peak. However, in the absence of monthly exhaustion, I’ll simply wait for prices to break this existing uptrend and break the trend of seven straight months of gains.
Cycle composites suggest trends are overdue to reverse
When employing my cycle software on RBOB Gasoline, both daily and weekly cycle composites generally have a negative bias for the balance of this year and should be peaking.
Daily cycles of 150 trading days have been the most accurate timeframe generally going back over the last 10 years, showing troughs occurring at about a 5-7 month interval. Weekly charts show the annual cycle having a big influence, or 52 weeks.
Interestingly enough, the daily cycle should be peaking now and turning lower into late July. The weekly cycle also is negative into end of year. However, as we know, prices continue to escalate and have given no real technical indication of trend change.
Thus, until this price trend breaks to at least a new two-week low, it’s thought to be likely to persist into the late summer before reversing course. September to December likely would bring about a stronger period of downside consolidation.
