The widening rift

  • Posted by
  • on March 28th, 2012

 

As our readers know we trade and observe the $OIH a lot– it’s one of our best tells, and it was one of the only commodity sectors that had not yet broken.     Yesterday, it broke through the 41 “line in sand” we noted last week.   Once we noted that we posted:

 

 

It wasn’t a difficult call– market was overheated, and crap stocks were running, while OIH was breaking down.   We switched to a more defensive status in our newsletter and focused more on pull-back support longs.      Note the second test and break-down of trend-line yesterday and continuation down today:

If your time-frame is longer however the market technically is sound as long as it holds above this trend-line.  As you can see we still have a way to go:

Our biggest worry, one that we have outlined many times in last few weeks, is the ever-widening divergence between commodities and the rest of the market.   It’s not sustainable — either the market will stop going up and wait for catch-up, or commodities have to start gaining more traction.

The first quarter, as we wrote in our weekend newsletter, was an “easy tape orgy”.     For us this means that it’s now time to be more selective and more sniper-like in our approach.

 

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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