Technical Analysis of Crude Oil and Russell 2000 Index

Small-caps gauged by the Russell 2000 index or ticerk IWM made a failed bull signal on the breakout attempt in late March. I circled the day it started then failed to hold. A failed signal can be a powerful chart pattern. I expect us to test the lows soon and most likely blow through support much lower. Likely the S&P 500, Nasdaq, Dow Jones will follow. The next chart is the important price of oil. This is USO the ETF for crude oil futures. It is trying to find support on this trend-line I drew. It is currently a triangular bullish consolidation chart. The next couple days will be very telling on the next direction of oil. If it goes down the next couple days the run on oil could be over. Mortgage rates just rose at a historic pace and I expect the housing market to slow down. I think it's likely the economy slows significantly.

Oil chart

Russell Small-caps (IWM)

Bitcoin Double Top Forming

Here is some brief technical analysis on Bitcoin and the ETF GBTC. It couldn't reach a new high last winter and looks to be a clear double top formation starting. I drew another red line where there is some support. If this support gets taken out and price keeps dropping that is confirmatin of a top and we won't see new highs for some time. The chart is telling us there is likely more downside to come. If one is asking "is it a good time to buy Bitcoin?" the chart is telling us to wait.

Oil and Energy Continue to Perform

Crude oil continues to breakout and show high relative strength. It is a momentum breakout even as the overall stock market falls and continues to put up big red days. I see it as a high inflation play but regardless it is unstoppable at the moment. I'm fairly overweight energy in my long-term account and have been trading USO calls.

I like PBR Petrobras here with it's high increasing dividend payouts. It has increased the dividend greatly the last three quarters and it looks like big payouts are in the future. The floor for dividend payouts is $4 bil according to the company for this year and they see this increased payout contnuing for a few years.

They have reduced long-term debt considerably. They are looking for 60%-80% of free cash flow to be payed out in divdends. I noticed the stock chart while screening breakouts and then I saw the high dividend. The yield with the stock at $14 a share is roughly a 14% div yield here if things go as planned. The worst case dividend yield scenario is a 4.4% yield. I'm bullish on oil and see this as a good pick up here. It is coming off a bull-flag today.

TLT Short Setup

Long-term T-bonds look like a top was in. It did a technical top formation and took out support. They have just rebounded and kissed right off the old support line that is now resistance. Very text book action going on here. The fundamentals are when rates go up bonds go down and it looks like that is going to play out if the FED is forced into a corner with rates because of inflation. I think shorting bonds is a good play here. I am looking at the TBT ETF.

Small-caps Lagging Large-caps

I've been posting on Twitter lately about how the Russell 2000 Index via the ETF IWM has been lagging behind the other major indices like the Nasdaq and S&P 500. Historically a lot of people believe small-caps are a leading indicator in the economy. It makes sense as they are one of the major employers in the country and a good gauge on the consumer. This inverse correlation has been going on awhile now. I think if the Russell goes down and breaks below this trading range it is a good signal that the majors will follow. I'm watching this.