The Charts That Matter for Next Week

Hey There Income Hunters,

It was an exciting week for me for two reasons …

First, my kids (27-year-old daughter and 24-year-old son) came to visit after not seeing them since Christmas.

And, second, it was also exciting to see sentiment in the markets shift from higher rates and corrections in stocks and commodities back to looking ahead to greater growth and inflation in Q2.

Refreshing on both fronts!

So let’s run through 5 key charts that I will be watching again next week.

First up …

1. Russell 2000 (Ticker: IWN)

After dropping 9% from Monday’s high, IWN staged an impressive rally and turned all the way around Thursday afternoon, closing $4.62 higher on the day …

The move completed a bullish relative strength index/price divergence by establishing a new low price on Wednesday followed by a lower low on Thursday while the relative strength index (RSI) finished higher by the close …

We should see continuation of the uptrend next week and a new all-time high next month …

2. iShares 20+ Year Treasury Bond ETF (Ticker: TLT)

TLT built on a positive divergence of its own from two weeks ago to start the week …

Then it rolled over on Thursday as the Treasury issued $125 billion in 5-year and 7-year notes on Wednesday and Thursday. We have a break in supply until the second week in April when 3-year, 10-year and 30-year auctions are on the schedule …

Between the positive RSI/price divergence and end-of-quarter rebalancing, the lows in TLT should hold for a while…

I am looking for higher prices to sell next week because the following will bring 3-year, 10-year and 30-year auctions with approximately $120 billion in supply for the market to absorb.

3. United States Oil Fund ETF (Ticker: USO)

Crude Oil has also put in a bottom this week …

I called the turn in oil last week based on the Volatility of Oil Volatility Index (Ticker: OVX), which is the volatility index of USO…

This is an interesting chart. Let me set it up for you … 

At the end of last year, we had two corrections in oil -17% and -19% with +76% and +60% volatility.

This latest correction was close to the previous two in deltas at -16% — but the vol spike was a much smaller 31% …

I see that as an important divergence meaning the down trade is just that — a trade within a Bullish trend …

I added to my EXXON (Ticker: XOM) 62.5/57.5 Sep call spread yesterday and will look to add more next week…

Check out the chart below and notice how oil responded to each spending bill. The USO ETF (Black Bars) trended higher soon after each spending bill was put into action …

And what’s on deck? Joe Biden’s infrastructure spending bill, which is expected to be launched by September with a reported $3 trillion price tag

4. SPDR Gold Trust (Ticker: GLD)

Gold has been locked in a tight trading range

I see that as positive news that the gold correction is also ending.

With expectations for higher consumer price in the months ahead and accelerating growth, as well ,… GLD could continue its longer-term bullish trend that began in mid-2019.

On a break higher out of this consolidation range, I will be adding to my GLD vertical option strategies and my gold miner stocks as well.

Bring it Home

OK, #IncomeHunters, this is it …

We turn the page next week to what may end up being the most powerful quarter in U.S. history, what I have dubbed The Best Quarter Ever.

We have had nice corrections in all sectors and now the fundamentals will take over …

The only way we would not have a positive quarter for the reflation sectors — including Energy, Materials, Industrials and Commodities — is if bond yields start a new trend higher and the Fed sits back and lets it happen.

But I am ruling out that possibility!

Why?

Because the Fed (with Janet Yellen at the Treasury) will do whatever it takes to create higher inflation so they must keep rates low for longer…

Have a great weekend Everyone and as always …

Live and Trade with Passion My Friends,

Griff

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