Slope of Hope Blog Posts
Slope initially began as a blog, so this is where most of the website’s content resides. Here we have tens of thousands of posts dating back over a decade. These are listed in reverse chronological order. Click on any category icon below to see posts tagged with that particular subject, or click on a word in the category cloud on the right side of the screen for more specific choices.
As I look forward into 2021, I want to paint a broad picture of what to look for directionally, as well as key turning points to be aware of. I will focus on the two main trades I am most excited about, SPX and crude oil. As we examine the below charts and analogs, consider them as a rough guide, using crayon not pencil.
Let’s begin by taking a look at the broader market via SPX. To gain a big picture forecast view of SPX I prefer to utilize the 10 year crude oil to SPX analog. This analog was discovered by Tom McClellan, and looks back to see what crude oil was doing ten years ago to give us a glimpse of what to expect with the broader market now. A note on this analog, and the other analogs I will discuss in this post; they will look to show you direction and key turning points to be on the lookout for. They do not reflect the magnitude of the move to expect.
I believe we are at the start of a new bull market in oil. In the famous words of Dave Chappelle, “Oil? Oil? Who said anything about oil?” Isn’t the world swimming in oil right now? Isn’t every possible tanker and storage facility filled to the brim? Why on earth do I believe that oil is starting a new bull market? I’m glad you asked. Let’s take a look.
Since this is the one and only Slope of Hope, let’s begin by taking a look at some charts. After that we’ll examine the geopolitical and monetary fundamentals that I believe will also play a role.
Earlier this month Jesse Felder penned the article, “A Generational Opportunity in Commodities?” He discussed the idea that rising U.S. fiscal deficits is bearish for the U.S. dollar, with one of the consequences being a return to a commodities bull market. The chart that caught my attention the most in his article is the chart shown below. This chart compares the Commodity Stock Index vs. the Dow. As you can see, the last commodity bull market ended in 2008, and commodities have been in a bear market ever since. This data goes back to 1937, and commodities are now the most undervalued relative to the Dow in that time span.
Preface from Tim: I am usually very hesitant to do any posts like this. The last time I did one even remotely close, one reader wrote to grumble about how this is not why he comes to the site. OK, fine. Skip the post. But TNRevolution has been such an important Sloper, and his contributions so generous, I’m going to bend the rules. I appreciate his hard work here, and his openness.
Why do I care? Why do I care about the state of race relations in black America? I am white. For one, I am a human being. To be a healthy human being is to have a measure of empathy. I am no different. When I see people hurting, my initial instinct is to help. Whether it is tornadoes ripping through Nashville, Covid-19, or black Americans being abused, I want to be a part of the solution. Second, it’s personal.
I grew up in rural America, in the suburban country north of Nashville, TN. In the school I grew up in there was only one black kid. I only remember him ever being in one of my classes. Everyone I knew in my world was white. That changed rapidly as I left home to attend college. Students from around the world attend Georgia Tech, and living in downtown Atlanta was a dramatic counter to my all-white childhood. I loved it. As college passed, I met and made friends with people from all over the world. However, I didn’t have any black friends. Why was that?
I anticipate June being a month with opportunities for both bulls and bears. More specifically, I am looking for a possible 7-10% correction on $SPY at some point over the next 2-3 weeks.
The June $SPY chart is shown below.
May POC: 282.28
Value High: 296.79
Value Low: 279.46
Not shown on the chart is a Nov /ES POC at 3083. If we see any strength in $SPY to start the month, one interesting setup would be a failed breakout of /ES 3083.
I have noticed something about this rally off the crash low. It has a rhyme to it. I remember thinking to myself during the crash, and hearing other say, “It feels like the entire 2008 financial crisis is condensed into one month.”
We are seeing the something similar transpire with the bullish move off the crash low. The Fed is using the same playbook that launched the QE bull market, but at an accelerated pace.
First, let’s take a look at a chart of the history of QE that Tom McClellan posted to his Twitter feed on April 5th. You can see from the chart that the stock market nicely traced the path of QE up until 2017. Much of what transpired after 2017 was retraced during the crash.