Rafa 500: Postmarket Update 9/29/09

Bearish setups in the energy and material sectors are beginning to show.  I’m long $CF, but I’ll look to get short $MOS below 48.15 or $POT below 85.50.  $CCJ also looks like it could could see 22.50 in a hurry if it breaks 25.40.  Equities within the energy sector still look strong, $XLE and $OIH components are a long way from being short candidates.  On the other hand, I am about a week to two away from taking short positions in crude oil and gasoline if they act the way I predict.  Take a look at the two charts below, the crude oil ETF $USO and the gasoline ETF $UGA.

I’m expecting crude to trade modestly higher over the course of the next 3-5 trading days, after which the 50 day moving average should provide resistance on the USO.  It’s looking like the short entry will be below last Friday’s low, but if we take a dive in the next few days I will refrain from getting short as my system criteria won’t match up.  UGA is looking even worse than crude at this point, it normally leads, and this short entry is only about a week away.  UGA is well below the downward sloping 50 day moving average at this point and due for a bounce.  The low from today may provide the short entry if we see a bounce here over the coming week of trading.

I’m also stalking a short position in copper now.  We may be a bit further away from seeing a signal to go short here as copper needs time to top out and roll over.  I think we are about 12-15 trading days away from seeing that signal, the 50 day moving average needs time to roll over and the current 55 day low needs time to move up the chart.

I’m very interested to see how the gold miners will react to a roll over in the equity market coupled with a move above the recent high in gold.  Which asset class will they move with in this case?  I believe gold is going to 1300 sooner than later, I’m just not sure where that leaves other assets right now.  It should be an interesting 4th quarter.

Don’t get antsy here with these short positions, the time is still not ripe.  Playing Rafa Nadal on the red clay at Roland Garros is like walking through the desert, it just never ends, I get the feeling shorts are having this recurring nightmare about the market.  It will be more than obvious when the time to get bearish is upon us, this is not it.

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