In a TradeGateHub Live Trading session, Coach assessed whether the ongoing correction in WTI crude oil could set up a wider risk-on move across markets. He also mapped a potential Wave 4 triangle formation, arguing that the pattern leaves scope for the S&P 500 to push to new highs, even as near-term price action remains choppy.
Dale reviewed the recent rally in oil and said the first leg of the advance appears complete, shifting focus to defined technical areas where a pullback could develop. Attention then turned to the relative strength in mining stocks, alongside Coach’s base case for the U.S. Dollar Index (DXY) and the likely knock-on effects for precious metals.
Potential Market Reversal on WTI Correction and S&P 500 Setup
We should watch the current correction in WTI crude oil closely, as it might be the spark for a broader risk-on rally across the markets. With WTI recently slipping from its summer highs back toward the $76 per barrel mark, easing energy costs are giving equity markets some much-needed breathing room. We see the S&P 500 forming a potential Wave 4 triangle pattern, suggesting the index is consolidation-bound before a major breakout to new highs above the 5,600 level.
To play this expected move, we suggest derivative traders look at buying long call options or setting up bull call spreads on the S&P 500 to capture the next leg up. Since the initial rally in crude oil looks completed, we should avoid buying oil futures at current prices and instead wait for a deeper pullback to key support levels near $72. Selling out-of-the-money put options on WTI could be a smart way to generate income while we wait for crude to find a firm bottom.
Opportunities in the Dollar, Precious Metals, and Mining Stocks
We also need to prepare for a softer U.S. Dollar Index (DXY), which has struggled to sustain its position above the 103 level this month. A weaker dollar will likely fuel a massive surge in precious metals and mining stocks, which are already showing immense relative strength. We recommend trading call options on mining ETFs like GDX, as historical trends show these stocks heavily outperform physical gold once a broader risk-on environment takes hold.
