Oil Drillers  have had little to smile about over the past years. Could this trend be about to end? A pattern is in play that highlights a counter trend rally could be near.

Below looks at the Oil Drillers (XOP)/ S&P 500 Ratio over the past couple of years-

The ratio could be creating a double bottom at line (1), near the apex of a potential bullish ascending triangle at (2), as momentum is oversold and could be creating higher lows at (3).

Below looks at the Gold/US Dollar ratio over the past 8-years. The ratio is testing a level that has been critical to Gold bulls for the past few years and we suspect it will be critical for it again at this level!

The ratio declined sharply from 2011 thru 2013, where it hit a low in the 14.4 level. After hitting this level, the ratio rallied and created a new trading range before turning weak again and breaking below 2013 lows in late 2014. Since breaking below the 14.4 level in 2014, the ratio has created another trading range for the past couple of years, shaded in blue.

While FundStrat's Tom Lee has not been banned from ESPN, he may well be banished from mainstream business media as not only is he bullish Bitcoin, and the S&P's most-bearish strategist (target 2,275 year-end),  he is now calling for a 5% correction in stocks as market breadth collapses ...

"The constellation of evidence is growing supporting such a drawdown,"  Lee explained in a note this morning, pointing to  the percentage of stocks on the New York Stock Exchange that are trading below their 200-day moving average as a signal that is flashing red warning signs...

I'll make the sacrifice for my fellow BPT'ers

Below looks at the  Dow Jones Transports ETF (IYT) that remains in a long-term bull market.

IYT broke to new all-time highs seven weeks ago at (1). It stayed at new highs for one week, before selling pressure started taking place. The weakness has it breaking below 18-month rising support last week, which does send a caution signal to bulls.

The last two Spy Pro trades have produced a gain so far of +24.60% if you substituted XIV for SPY. This calculation assumes that the exit trade on 8-15 was held thru the close and not sold at the open.

YTD performance for substituting XIV and VXX for SPY and SH is +41.55% thru today's close.

This is one of those days where yesterday's RSI-2 closing value of 7.53% has become 76.67% st the moment, and the SPX is at 80.54 and the NDX is at 81.48 - roughly 3'15 pm. The bigger the one day spread overnight, the higher the likelihood of a next day reversal to the other direction. 

Statistically, I have found a pretty high correlation for a single digit RSI-2 level from a major index like RUT, that turns into a next day value for one or more of the major indexes that exceeds 70% at the close as being predictive of a reversal for the next trading day.

This is statistically even more likely when this event also has numerous short-term indicators at extremely overbought values. This would include the RUT's 60 min ADX-2 value currently at more than 99%, the 60 min RSI-2 at 99.74%, the 60 min RSI-4 at 92.85%, the daily Wm%B-2 at its maximum 0.00, along with numerous other indicators that I look at each day.....60 min NAAD, NYAD, etc

Of course, I am not stating that this is a "sure thing" by any means, only pointing out the statistical history of the pattern, and the short-term indicators.

Below is a chart showing historical streaks of trading days with 40%+ of S&P 500 stocks closing above their 50-day moving averages.  The length of the streak is just another data point showing just how long it has been since we’ve had any kind of market pullback.

There have only been two longer streaks in the S&P’s history dating back to 1990 when this breadth data begins.  In 1994 there was a 216-trading day streak of consecutive 40%+ breadth readings, and in 1995 there was a 217-trading day streak.

Below looks at the Stock/Bond ratio, which is created by using the S&P 500 and Zero Coupon Bond ETF  (ZROZ) . The chart below looks at the price action over the past three years. Since the highs back in 2014, the ratio for the most part has created a horizontal channel, chopping back and forth.

The ratio hit the 2014 highs earlier this year at (1), which in time could reflect that a double top took place. Right now it is way too early to confirm this. Since hitting 2014 highs at (1) the ratio has been a little soft, nothing dramatic for sure.

On my 60 min RUT chart at 3:40 - the RSI-2 is at 0.03, the RSI-4 is at 2.33, the RSI-14 is at 23.42, and the RSI-2 is at 30.01. These are levels that indicate a strong likelihood of a short-term reversal. A similar 60 min chart also exists for SPY.

The ADX-2 on my 60 min chart is also at 99.58 - another indication of a short-term extreme condition at the current time.

Another Good One!!!

How do you clear out a North Korean Bingo Hall?

Yell out "B-52"

The growth rate of real gross domestic product (GDP) is a key indicator of economic activity, but the official estimate is released with a delay. Our GDPNow forecasting model provides a "nowcast" of the official estimate prior to its release.

Recent forecasts for the GDPNow model are  available here. More extensive numerical details—including underlying source data, forecasts, and model parameters—are  available as a separate spreadsheet.

Latest forecast: 3.8 percent — August 16, 2017

The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2017 is 3.8 percent on August 16, up from 3.7 percent on August 15. The forecast of third-quarter real residential investment growth increased from -0.5 percent to 3.7 percent after this morning's new residential construction report from the U.S. Census Bureau.

After Thursday's dramatic 36-point drop in the  SPX, price on the  SPX:VIX ratio plunged to the upper edge of a  “Major Conflict Zone” and the  “Bull/Bear Line-in-the-Sand” level, as shown on the  Monthly ratio chart below.  A drop and hold below this critical  150 major support level will seal the fate of increased volatility and lower prices for the  SPX. The Momentum indicator has also fallen below the zero level, confirming that instability is in store for this index, for the

longer term, if it stays below zero.

Thanks to  Jesse Felder , we recently stumbled upon a measure of economic conditions that has reliably signaled every recession since 1948. The data point, Real Value Added, is currently in negative territory and may, therefore, be a harbinger of an economic downturn.  If it is a false signal, it would be the first in a 70-year history of observations.

https://realinvestmentadvice.com/an-indicator-of-peril/

The RSI-4 value for the Russell 2000 Index is currently below 10.00. If it closes below 10 it will be only the 8th time this has happened in the last 5 years for the RUT. Each of the previous 8 times led to a very nice rally within a short period of time. This is just one piece of technical data at the moment indicating an extremely oversold condition exits on a short-term basis. The VXV/VIX ratio is another data point that is currently at 1.03 - indicating that a possible reversal in the near term is in the cards.

But, given the potential concerns over the N Korea threat, I intend to scale into any trades that I take for this extremely oversold short-term condition.

Check out the $VXV:$VIX ratio. It currently is at 1.05 (near 11:30 am) - very close to the 1.00 mark that it went below earlier this morning....this 1.00 level is where the statistical odds favor a reversal. It's also currently 12.50% below its 9 ema line - the biggest spread since May 17th, when it also went below the 1.00 level and the 0.90 level before reversing.