Post by TradingForGod on Oct 14, 2004 9:09:48 GMT -5
Greetings all. I am writing this from my office at work, so I won't be able to add charts to this note. But I did want to tell you of a potentially negative event for the equity market.
As you know the S&P broke out of its major down channel a couple of weeks ago. I was looking for that break-out to power the market higher as we enter the best season for stock performance. However, the rally did not last very long and stocks have faded back. Initially I thought that a good opportunity to add to length from the break-out. However, with yesterday's sell-off the S&P closed below the 40-day MA for the first time since late August. In addition, it finished below the 62% (fibonacci) retracement of the rally from 9/28. Both of these events are negative, though not necessarily bearish. I point them out primarily as a note of caution.
Seasonally, equities should rally here and I know that Savant is bullish. However, this weakness is a bit more than I would have expected under a bullish scenario. The Dow is somewhat more negative than the S&P and the Nasdaq is more bullish (Savant's call on tech stocks). The 40-day MA for the Nasdaq is at 1888. A close below there would really add more negativity to the overall market. Watch out for that.
As for crude oil, the price for prompt domestic crude has gone up $13/bbl in just six weeks. My targets for this rally was 53.75. Prices have so far peaked at 54.45 during the day, but the high close so far is 53.64. If prices take out the recent highs I think oil will enter an exhaustion rally phase that will cause a rally to $56-$62. Yikes! Watch for that. When the market does peak, the MINIMUM target for a sell-off is around $41, but prices could ultimately work lower than that. The big key is going to be how world oil demand is affected by chronically high prices. THe world is betting on high prices for a long time. You have to go out to late 2008 to find crude oil lower than $40 on the futures market. Think about that next time you want to buy a car!
God bless you all. Peace,
TFG
As you know the S&P broke out of its major down channel a couple of weeks ago. I was looking for that break-out to power the market higher as we enter the best season for stock performance. However, the rally did not last very long and stocks have faded back. Initially I thought that a good opportunity to add to length from the break-out. However, with yesterday's sell-off the S&P closed below the 40-day MA for the first time since late August. In addition, it finished below the 62% (fibonacci) retracement of the rally from 9/28. Both of these events are negative, though not necessarily bearish. I point them out primarily as a note of caution.
Seasonally, equities should rally here and I know that Savant is bullish. However, this weakness is a bit more than I would have expected under a bullish scenario. The Dow is somewhat more negative than the S&P and the Nasdaq is more bullish (Savant's call on tech stocks). The 40-day MA for the Nasdaq is at 1888. A close below there would really add more negativity to the overall market. Watch out for that.
As for crude oil, the price for prompt domestic crude has gone up $13/bbl in just six weeks. My targets for this rally was 53.75. Prices have so far peaked at 54.45 during the day, but the high close so far is 53.64. If prices take out the recent highs I think oil will enter an exhaustion rally phase that will cause a rally to $56-$62. Yikes! Watch for that. When the market does peak, the MINIMUM target for a sell-off is around $41, but prices could ultimately work lower than that. The big key is going to be how world oil demand is affected by chronically high prices. THe world is betting on high prices for a long time. You have to go out to late 2008 to find crude oil lower than $40 on the futures market. Think about that next time you want to buy a car!
God bless you all. Peace,
TFG
