This could be a make or break day for the markets. We are now within spitting distance of 200 dmas so any downward movement could easily gather steam. When I predicted a week of sideways trading last week that would have to have included some sort of upward movement as well so we really need it today otherwise my consolidation premise is out the window.
Asia suffered another day of big losses last night, averaging 2% across the board. Fear of interest rises is rampant, especially in Japan where many years of 0% borrowing have given investors no appetite for any change.
Europe is showing a little strength with numbers there showing that exports are not suffering as much as expected, even though the dollar is now down 8% against the Euro for the year. DCX is way oversold so I will be watching them to see if we might be getting a turnaround over there.
It’s all about the S&P over here today – will it revisit the 200 dma at 1,260 or was yesterdays very quick bounce enough to propel it back on the long road back to 1,295? It will be very hard today as oil is having another bad day with all this terrible peace talk and metals may suffer as well if people stop worrying about nuclear terrorism for a day.
Oil fell .14% against a 1% dollar rise yesterday and it is that, more than Iran news that is keeping the prices down overseas. Today’s inventory report should show a small draw due to the holdiday weekend but traders are looking for any excuse to get prices back up so they will be watching demand numbers very closely for any sign of an increase.
Gold is down around $624 which is a dollar adjusted $575 and should test the adjusted 200 dma at $540 which is $583 before it turns. I will be jumping in on gold stocks there in hopes of a nice bounce as gold has not seriously violated the 200 dma in many years.
Another good day to watch the spectacle from the sidelines. We are back in one of those situations where oil will either pull down the markets or the commodities will bounce back and provide the exact kind of leadership we don’t want.
World wide chip demand is much stronger than expected and if today doesn’t get the SOX moving then there is really no hope for the Nasdaq.
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Much as it kills me, I’m not jumping into oil today as it has been too tough to get a good call on direction. The Valero Rule has held up well and I will have a couple of momentum trades tee’d up but only if there are clear and compelling reasons as I will be surprised if the oil patch drops more than another point from where it is without an actual acceptance of the offer to Iran or perhaps a huge inventory build.
To the upside:
RDC is a great way to play the long-term demand picture as they are literally building rigs as fast as they can to meet demand. They rest on the 200 dma at $39 so any move down makes this an easy out while the $40s are just .90.
XOM should open down a bit on sub $72 oil but if oil creeps back over then the $62.50 calls for .25 or less make a nice gamble.
To the downside:
OII is still in denial, not far from its all-time high. The Jul $75 puts are $3.30 and should absolutely be sold if they lose 20%.
BHI looks way overbought and could fall with the sector. The $85 puts are $1.65.
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I’m still watching the same list and I still have no interest in jumping in today.
The transports look interesting with YRCW upping guidance which should bode well for FDX and UPS.
It will be nice if GOOG can break my $393 target but I will be getting out quickly if it reverses.
I’m watching GE and SNDK and, of course AAPL to guage direction but we are so far from even a small bounce that nothing really appeals to me.
