In this week’s interview with Toni Turner of TrendStar Trading Group, we discuss the wider swings that have been occuring in the market, and whether the period of calm trading that investors have enjoyed in recent memory is coming to an end.
EQ: June has been like a roller coaster ride this month thus far with stocks swinging about 2 percent up and down over the past week. Is the market just trying to decide which direction trend it wants to pursue next?
Turner: Yes, it really is. As you know, for the most part we’ve been trading in an uptrend since November of last year, and on May 22 the major indexes touched their year-to-date highs. For the S&P and the Dow of course it was all-time highs. With such a big run-up percentage-wise, and the seasonal directive that tells us that markets can sell-off in May or June, profit-taking came in after those May highs. Of course we can also see that a global slowdown is in process and many investors are taking money off of the table.
EQ: Investors and traders have grown accustomed to a tranquil market. Is volatility starting to return to normal levels or are these heightened swings?
Turner: Markets typically experience low volatility when they melt higher, as we’ve seen in the first five to six months of this year and of many other years. But when markets get toppy, then the disagreement between the bulls and the bears over whether the market is going to go higher, or whether the bears can take it lower causes heightened volatility, or wide price swings.
EQ: There’s a lot of talk about the bulls no longer in control. What are some signs that you want to see before determining the victor?
Turner: We can haul out some very complicated signals, but the easy ones remain to me the very best ones, and that is, of course, the S&P 500 here basically is trading between its support level at 1,598 and its May 22 high of 1,687. So the easy answer and the best one is, can the S&P 500 rise up, make a higher high, trade over 1,687, and use that as a floor or support level? If it cannot do that, then we are probably looking at lower levels into the summer.
EQ: What sectors or industry groups are you watching now?
Turner: Yes, and I think the most interesting one is the United States Oil fund (USO). I wrote about it on my Market Now weekend video, and we also talked about it in Toni’s Market Club. It appears to be making an inverse head & shoulders. Now, if that is happening, and if it follows through, we could see the USO– which reflects rising oil prices of West Texas intermediate– rise to $37 or even higher, if this plays out the way the pattern is indicating.