foxex: Rebound Continues

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Chart Advisor | Focus on the Price

By Gordon Scott, CMT

Friday, May 15, 2020

1. Stocks recover from opening loss to end higher

2. One ETF that picked a bowl of cherries

3. Oil storage issues solved?

Market Moves

Bond prices rose and stocks fell to open the trading session today, but by the time it was over, those assets had switched places, with stocks on the rise and bonds retreating. Commodities moved higher today even as the U.S. dollar also edged upward. That's a bit unusual but it signals that investors haven't given up on the U.S. markets. The price of gold closed at a new 52-week high as it works its way into a region approaching its former tops, and the price of oil established the first evidence of an upward trend since the catastrophic lows that printed last month.

The chart below takes a closer look at Invesco's Nasdaq 100 index ETF (QQQ) which has followed a relentless rising trend towards its old highs. Price trends can literally change on a dime, but if traders want to make trades that bet on prices rising, it helps to have a forecast. That way they have clear ideas about when the forecast is breaking down (and therefore provide a signal to get out of such trades). Chart watchers know that rapid rebounds don't continue forever, but in these unusual circumstances a simple guess might be based on the following two assumptions. First, assume prices go up. Second assume they will go up at a slower rate then they have so far. This chart splits the difference and makes for a reasonable guess.

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One ETF that Picked a Bowl of Cherries

When growth stocks such as those found in the Nasdaq 100 index (NDX) take center stage and lead the markets higher, it helps to recognize which ETFs can best help take advantage of such moves. State Street's S&P 500 index ETF (SPY) and its Dow Jones Industrial Average ETF (DIA) are excellent sources for tracking the market average performance. However some ETFs try to cherry pick the best performers using a cohesive strategy. A few have been quite successful.

The chart below looks at one of these, O'Shares Global Internet Giants ETF (OGIG), and its top three holdings. The ETF was specifically designed by Kevin O'Leary's ETF company to find stocks of large-cap companies that showed ongoing opportunities in the world of online business. The performance through the pandemic has been quite impressive, and it is heavily influenced by Amazon's (AMZN) latest run (which looks poised to continue as it closed up against short-term resistance today).

Chip Stocks Could Sell Off in Coming Weeks

Better-Than-Expected Car Sales Boost Auto Parts Stocks

Oil Storage Issues Solved?

As crude oil futures (USOIL) closed another seven percent higher in trading today, it created a chart dynamic known as a "higher high." Chart watchers recognize the sequence of higher highs and higher lows as the definition of an upward trend. Such a phenomenon likely means that the energy markets have at least begun to address the thorniest points of its supply and demand imbalance. The good news is that this can only help the world economy improve. The bad news, as shown by the chart below, is that fuel prices won't stay so low for long. For the brave, buying airline tickets right now will likely get you prices you won't see for quite a while afterward.

The Bottom Line

Bonds and stocks showed back-and-forth behavior while commodities rose higher to finish the week. Companies whose business is largely online seem to be thriving. Oil and fuel prices are trending higher. Get ready to pay more for gas.