Don't Argue With Momentum.

1.) OIL – Those lower highs started to add up. Now, this AM, oil has broken down below an important trade signal at $99.72. West Texas Intermediate is currently at $96.15, down another 7.7% on top of yesterday’s 2.51% drop. Importantly, WTI is, so far, finding support at its trend level of the $90 area. If WTI breaks below $86.41 and holds, it would not be surprising to see it test $70. Also important is that oil volatility (OVX) is falling at the same time we’re seeing oil prices come down. We’ll see how it goes, but oil isn’t likely to go straight down from here. Volatility is dropping, but it is still near 75, which is very high. The higher likelihood is that we get some chop. If it does move up from here, another lower high below $104 would be a good sign. So far, it would appear that the “top” thesis is still in play. I don't like to see oil this high, but I also would not like to see oil collapse from here, as that could very well usher in the end of the business cycle as it has previously.

2.) NASDAQ 100 – Regardless of what oil will or won’t do, you cannot argue with momentum in stocks. The NASDAQ 100 has been above and has not touched the 10-Day Moving Average for 20 consecutive days. Historically, this saw the NASDAQ 100 higher 10 out of 12 times 3 months later, and 11 out of 12 times 1 year later, with an average gain of +19.6%. The 3-month Average Max Drawdown was -8.7%. So, as always, the trend is your friend until the bend at the end...which is not here yet.

3.) GOLD – So far, gold is still in this long consolidation from its January peak. On a longer, monthly time frame, gold is still in a bullish trend. Daily and weekly time frames look much weaker after the damage in March. The data suggests that the March sell-off was mostly created by central bank sales. Central banks sold a net 30 tons (t) of gold in March, with sales from Turkey (60t) and Russia (6t) offsetting purchases elsewhere. Gold is up +2.8% so far this morning, but hitting shorter-term resistance at the $4,700 level. On a daily basis, gold is still making lower highs below its trend, which increases the probability that it tests the March low area near $4,300.