Oil Surges
The market bears were at it again yesterday. All indices, both domestic and abroad, collapsed. The decline was on low volume, but it was painful. No sector outside of healthcare was able to escape the wrath of sellers.
Surprisingly, it was our healthcare trade that hit its stop yesterday. But given how close I am keeping stops lately, all positions are at risk of being closed down.
In strong trends stops can be liberal. But in chop like we've gotten from the market for nearly four months stops must be conservative. The market is deciding which direction to take.
And while I think it will be bullish we have no guarantee that will be the eventual outcome. Until the market "rights it's ship" we are left with a portfolio of stocks with tight stops, which will result in fast transactions - something I don't care to have.
The bulls lost 1332 support again yesterday. And I favor a move that takes SPX down to 1301 before a real rally can take hold. Much like last week, I think the market will need the support of commodities if it is to climb any higher over the next week to month.
Oil is in a precarious position. Crude has found resistance at $100 and support at $97 for the past two weeks. One of these days it will break that range, but it's unclear which direction the break-out will be. To the downside the first target is $90 and to the upside it's $108. Needless to say, I think oil is about to make a big move within the next month. Since I favor new highs for the market, it makes sense that oil would rally higher. But quite honestly, the descending triangle oil has formed over the past month points to a move to $90. Let's watch oil closely over the next week, its break-out will likely confirm (or lead) the market direction for the next month.
