One of my favorite charts for timing weekly market direction and swing trades is the 1-hour chart of SPX with 13-hour and 30-hour moving averages. The 1-hour chart of SPX is clearly still trading under a sell signal.
On Tuesday, November 20, 2018, the 13-hour MA broke back below the 30-hour MA giving us a clear sell signal. Until we get the 13-hour crossing back above the 30-hour MA line, it’s better to stay out of this market and on the sidelines and in the safety of cash.
Both Initial Jobless Claims and Durable Goods Orders supported the emerging theme that the U.S. economy is rapidly slowing from Fed rate hikes.
Initial Jobless Claims was forecast to come in at 215K, the actual number was 224K.
Durable Goods Orders was expected to contract by -2.5%, the actual number was -4.4%.
The EIA EIA Petroleum Report also reinforced the theme of a slowing U.S. economy. Crude oil inventories were expected to show a build of +2.94 million barrels, the actual number was +4.851 million barrels. Distillate’s were expected to draw down -2.75 million, the actual draw down was -77K. Gasoline was expected to draw down -198K, the actual draw down was -1.295 million so gasoline showed some bullish demand but two out of 3 items in the EIA Petroleum Report suggest a slowdown.
The plunge in the price of oil is starting to negatively impact shale drilling. The Baker Hughes Rig Count show -3 rigs were shut down. I expect the Baker Hughes Rig Count to continue to show rigs being taken out of commission as the price of oil falls.
What President Trump doesn’t understand is that when oil plunged between 2014 – 2016 down to the $27 area, fake news was claiming that it was going to be a huge boost to consumers and thus consumer spending would soar. I remember sensational headlines that said things like, “For every $5 the price of oil drops, it’s [XX] billion more in consumer spending”. It never happened. My personal savings from lower gas amounted to about $50 a month. Big deal. I didn’t change my spending habits because of $50 a month. No one else did either. The problems that the average consumer has go way beyond $50 a month. Try dealing with healthcare and the fact that it takes 40% of a head-of-household’s monthly wages to pay for a family of four.
As the global economy slows and the demand for oil drops, the price of oil drops which puts a strain on the Energy sector as well as credit markets which leads to the loss of good paying jobs.