|Who’s Running This Show Anyway?
|March 13, 2007
With the sheer number of talking heads out there giving their opinion on every news story to come across the wires — you’d be shocked to learn what they haven’t been talking about.
Heck, I’m still kind of scratching my head on this one. In fact, the silence convinces me it’s probably an even bigger deal than I first thought!
Okay, enough with the teasing…I’m referring to unleaded gasoline. You know that stuff we all have to buy to keep our cars from dying in the middle of the road. Yeah, I’d say it’s slightly important!
Now if it were just important to transportation, I doubt I’d be making such a big deal of it. I’d leave that to Car and Driver or whomever! No, I’m only concerned with how unleaded gas is affecting our market and in turn our stocks.
You see, I’ve been watching this trend for awhile now and it’s been making some major moves. But as I said NO ONE was talking about it. So you know I just had to, right? I mean, c’mon, I don’t run with the market chasers…I’ve been paving my own path for years. And it’s worked so far so I’m not stopping now!
Well, on March 4, I alerted my subscribers to this curious “non-headline-news” item. (Hey, if everyone else wants to stay in the dark, I say “Let ‘em!” But that’s certainly not my philosophy and I’m betting it’s not yours either!)
You can find out exactly what I said in my March 4 alert right here.
The Dawn of a Trend
It’s pretty obvious that a new day has begun when you wake up to sunlight shining on your face. But how do you tell that a new trend in a certain stock or index has begun? Well, one tool for doing so is the aptly named Aroon indicator.
The Aroon indicator was developed by Tushar Chande in 1995. The name “aroon” means “dawn’s early light”—that is, the change from night to day—in Sanskrit (the ancient language of India). Chande chose this name because his indicator signaled the start of a new trend, just like dawn signals the start of a new day.
The Aroon system uses two lines to plot market trends: an “Aroon up” line and an “Aroon down” line. The Aroon-up line measures how long it has been since the highest closing price, and the Aroon-down line measures how long it’s been since the lowest closing price. When the Aroon-up line is going up and crosses the Aroon-down line as it is going down, that’s a good indication that the trend is becoming bullish. When the opposite happens—that is, the Aroon-down line is going up and crosses the Aroon-up line as it goes down—that may mean the trend is becoming bearish.
Of course, not every Aroon crossover is equally strong, and a good technical analyst doesn’t rely on any one indicator alone. But the Aroon indicator is one of the key indicators we use at Trending123 to identify trend reversals (such as the one I just saw in unleaded gasoline) before everyone else wakes up and—well, smells the gasoline.
What’s Really Going on Here?
Unleaded gasoline has been rallying upwards continuously over several weeks now. This is just unprecedented behavior.
And the question I keep asking myself is why. Why now? Why is unleaded gasoline at such highs? It’s not like hurricane season is a-comin’! There’s no news at all that would explain these kinds of highs.
All we’ve been hearing is news of demand slowing and a “soft landing.” How many times have I heard that lately? Ha. What soft landing? Seriously. Where is it?
What we’re really seeing here is massive bullish divergence.
The See-Saw Effect
This unprecedented unleaded gasoline rally isn’t going to continue forever.
Let’s backpedal a bit to January 15, 2007. This is the day that $GASO bottomed at $1.34. Around that same time certain momentum stocks topped. What does that tell us?
That momentum stocks are trading at the inverse of unleaded gasoline. This cannot be coincidental. This is the big deal! This is what has me baffled in terms of what you are NOT hearing from the market pundits!
Futures in $GASO are pointing to a reversal downwards now. $GASO is now in extremely overbought territory and is facing resistance. So gear up for a pullback in $GASO and a bounce in the momentum bullish stocks. (Find out what stocks make my Momentum Bullish list here.)
Since nobody has picked up on this relationship between unleaded gasoline and momentum stocks, how are they going to tell you when the bounce happens? And how are you going to know which stocks are best for the bounce?
I’m going to tell you. I’m going to keep you in the loop. I want you to try out my site: trending123.com. But I’d really like it if you accepted the 14-day free trial offer to my Trending123 service. That way, you’ll be the first to know what I know! Click here to find out more about this special offer.
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