US30 wants to break higher, today's close above the 200 SMA

FX:US30   Dow Jones Industrial Average Index
Sector rotation has been occurring since late last week, as we have seen technology stocks get sold (profit taking), and stocks in the industrials , materials, energy, and financials have been getting bought up. Today, the Russell futures only sold off 6 ticks before ripping higher and closing up 4.26%. The Russell stood out amongst the crowd today, with the S&P 500 and Dow Jones following behind neck and neck up around 1% each.

The Russell 2000 futures also closed above their 200 day SMA , signaling that the market could be shifting and getting ready to trade higher. If we think about this from an economic perspective, and from an index perspective, the most beat down sectors have been travel, airlines, industrials , retail/hospitality, and energy. This makes sense given that demand in these sectors all but dried up given the lockdowns, with energy taking home the prize for "most royally f****d over" due to the price war started by the Saudis (occurring nearly simultaneously). We saw the May contract for WTI Crude go negative, and not just like $1 negative but into the -$40s. All of these sectors are now seeing bids, and at the same time, we see the economy beginning to reopen more and more each day(despite the spikes in cases in some states). Energy is also on the comeback, despite the JMMC (Joint Ministerial Monitoring Committee) announcing today along with Russia the scheduled rollback of cuts was going to take effect as they see "improving economic conditions". Granted the market is still vastly oversupplied, I believe the rally is due to impending supply shocks down the road as demand in the economy picks back up, and supply levels deplete. Today's Oil Stocks report showed a draw of over 7m barrels from storage week over week.

From a technical perspective, we can see that $US30 has had a hard time staying above the $26000 level before getting smacked back down below. Granted we have now risen above this level with vengeance and ran right into a resistance level , I believe I am beginning to understand what this market is doing, and where it is likely going: higher.

We can see from the heat map (see finviz.com) this sector rotation happening in real time, we see the earnings surprising to the upside, we see positive headlines on a vaccine from numerous sources and companies, we see the economy reopening more and more. The downside risk factor to watch is the case to death ratio, and if we start to see rises in the death rate along with these continued spikes in cases, then we could easily reverse from here. As of right now, given all this information, I am bullish , and looking to enter near support for long trades only.

Thank you for reading! If you enjoy my posts, please like or comment and I will get back to you as soon as possible! You can also follow me on Twitter for more analysis and other trading content! @CJOTrading


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