While the market ended up for the week, we made note of a little reported item: a down Friday followed by a down Monday. Friday June 4th the market closed down and then Monday June 7th it closed down again. Historically, this has been an indicator of a top of a run rather than a bottom. We were also not impressed by the low volume on the days where the market rallied.
We see both of these as concerning and continue to make plays accordingly. We raised a little more cash over the week: these were positions that hit our sell stop price and we did not reinvest in other securities. We are not overly bearish at this point but, other than brief rallies, are not seeing anything that would move us back to the bullish camp.
This week we are going to look at two energy commodity based ETFs. These are for informational purposes only. Commodities should not be used as buy and hold investments. Please consider them carefully before purchasing.
Consider: United States Natural Gas Fund, LP (UNG) – while not the most attractive chart with the 50 day Moving Average below the 200 day MA, the 50 day MA recently turned up and UNG is trading well above that line. It also ranks near the top of all commodity ETFs at this time. We would consider this in the low $8.00 range, with a stop loss of $6.50, which breaks recent and all support. Short term target would be $11.00.
Avoid: United States Oil Fund, LP (USO) – USO is trading well below its 50 and 200 day MA. USO also ranks low in relative strength to other commodity ETFs. With all the coverage of the tens of thousands of oil spilling into the Gulf daily, you may be thinking this has to be bullish for oil prices. In the long term, maybe. However, there is a huge amount of oil that has already been extracted and is floating around various oceans waiting to be refined. In the near term, there is more oil available than capacity to refine it, which is anything but bullish. We would not be buyers of USO.
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