This was one of the stranger days I've seen in a very long time. Some of the recently weakest sectors, like the transports, the Nasdaq-100 and the semis, rallied the most today. The trannies were obviously boosted by oil getting crushed for the second day in a row. As for the why the semis and the Naz 100 got moving today, your guess is as good as mine. But that's not the strange part, what really got me about today was how narrow the rally was. For most of the day, before I left due to boredom, the advance decline line was negative. That combined with the S&P and Dow being in the red made me really suspect of the Nasdaq rally.
On a day like this I always want to look at how the various sectors performed. Here are some tables from the StockCharts.com's Market Summary page . The sole long green bar next to the Nasdaq 100 says it all about the Major Indices -- it had a 1.9% gain and no other index on the list was up more than 0.32%. That's narrow!:
The sector (industry) indices shows that the internet stocks (GOOG) did the heavy lifting today followed by semiconductors, computer technology, biowrecks and transportation stocks:
Here's the Nasdaq chart:
And the QQQQ, which was the big winner on the day:
The S&P is sitting on that trendline for the second day in a row...
The Russell is finding support at the 50-day moving average:
The Sox rallied back to resistance:
Ditto for the Dow Transports. Given how badly oil's getting slammed I expect this sector to keep running.
Another Mike wanted me to take a look at HAL and or OIH so I thought I'd do Halliburton Company (HAL) and USO. For both, using the 200-day moving average as a tell whether to be long or short would have worked out well.
(Edit: Trader Tim posted a chart of HAL tonight too.)
The creation of USO was well-timed, wasn't it? Like they say, when the ducks quack, feed them. Somebody should go look at how many sectors have topped right after their ETFs were created. :-)
And last but not least, one of the few decent long setups I found tonight, The Shaw Group Inc (SGR):
The Nasdaq & Russel's short term trends are now up.
| Trend | Nasdaq | S&P 500 | Russell 2000 |
| Primary | Up | Up | Up |
| Intermediate | Up | Up | Up |
| Short-term | Up(+) | Down | Up(+) |
(+) Indicates an upward reclassification today
(-) Indicates a downward reclassification today
Lat Indicates a Lateral trend
A rather sobering post. After this afternoon's NAZ rally, I was high on euphoria. Now I have to come back down to earth, at least a little.
Great analysis, Thanks.
Glad I could be of service :d The reaction to tomorrow's jobs report should be interesting -- as if this week wasn't already interesting enough
My opinion: sector rotation. Commodities were dead by May, now they are buried. Tech, pharma, and retail will lead the next leg up on the bull for the SPX, but it will churn as the allocators work on it. The nonconfirmation of the Trannies and Indies will resolve with the Trannies moving up to confirm.
My opinion is worth every penny you paid for it.
:)>-
My 1 cent worth is the global markets churn until we get a much needed correction in Q1 then the next leg up.
It seems like the consensus on the 'net is that there will/needs to be a correction in the market, and soon.
Is this to be the "typical" definition of correction, i.e., 10% off peak?
Is the 'net consensus on the correction the "smart money?"
How many of the folks calling for a correction soon are considering themselves "contrarian?"
How many of the folks calling for a correction soon have money on it, i.e., large cash percentages, longer-term shorts, puts bought, calls sold, etc?
Anybody reading this (besides me) not looking for a correction in the near future?
Just curious.
I expect nothing. :-"
nice analysis mike. i think the net stocks are the place to be right now (along w/ some other key tech names like aapl, goog).
argh - i meant appl, csco :d
Sounds like you watched Cramer last night :d
haha, no i didnt but i see why you said that now.
Re: Oil & Gold, Commodities
What is needed to be taken into account, which seems to escape everyone's analysis here, is the geopolitical situation which will sharply affect the prices of crude and gold.
Some of these factors are:
1) IRAN: If 2003-2006 headlines belonged to IRAQ; 2007/2008 will be the years for IRAN's. All appearances, and logical deductions, and extrapolations indicate that US, Israel, UK, Australia, and the regional Arab countries in the Persian Gulf area will NOT allow things to go on as usual in IRAN.
There is a lot of maneuvering politically, as well as militarily in the region. A new Admiral is now put in charge by the President for the sole reason that the coming phase of the operation will be mostly by sea (i.e., Persian Gulf missile strikes on Iran).
This will sooner or later happen. And even if it does not, the rumors will affect oil and gold once the current hedge fund selling is finished.
Another reason that oil is being driven so low by government publishing "inventory data" showing increases, etc.:
US is trying to lower crude oil prices artificially, albeit temporarily, so to put financial/economic/psychological pressure on Iran and Venezuela. Also, when the purported military operations against Iran are initiated there will initially be a spike on oil prices. So by lowering the price of oil before the military strikes, you end up with a lower peak.
And if a concerted oil embargo of Iran (and Venezuela) takes place by US and allies, or a naval blockade of the Hormuz strait in the Persian Gulf, or Iran delivers on its threat to mine the said strait; then we may see price spikes near $100-145/barrel before it's all over. And "all over" may take a while, too, judging by what may happen if Iran regime is wounded but not dead in the strikes.
So, don’t count anything out yet, especially commodities. These markets have historically acted "down" before they turn around and spike higher than the last highs they had. Markets usually behave in reverse near their turning points. Case in point: the dot com euphoria of 90s blowing off in 2000. We can have a blow off to the downside, followed by sharp rallies in commodities. Especially when 2 of them, oil and gold, are manipulated by interested super powers for geopolitical reasons right now.
According to most commodity experts, commodity rallies last between 10-14 years. We are just at the beginning years of it.
2) DECLINING US DOLLAR: It ain't over yet! In fact, it is just beginning. Next peak: 1 EURO for 1.6 USD; I would consider selling my gold when that comes around. Before that, I am adding to my precious metal portfolio.
On top of that, Iran and Venezueal are now switching their general trade and oil trade currency to Euros instead of USD. that could be followed by other lunatic regimes against the west with something to sell thatthe world needs. And that could push the USD even further.
3) LATIN AMERICA: If you have not noticed this continent of South America is having a nostalgic flashback to Leninist socialism: from Venezuela to Bolivia to Ecuador to Chile (to a lesser degree). Mexico was almost lost too in the recent elections 3 months ago, but was saved mostly due to US influence supporting the conservative pro-business Calderon.
Chavez is nationalizing all utilities including natural gas now, and he just got re-elected in a land slide. The native President in Bolivia is sure to follow suit.
Socialism ain't good for "biz". This kind of geopolitical stuff affects gold and oil prices.
Conclusion:
All in all, don't believe everything that the talking heads on CNBC peddle; they have a vested interest (and are paid to) mislead the general investing public so that their corporate clients could enter and exit markets at a better time and price, and with more profit. And all their governmental lobbyists are satisfied with what they air as the true trends in markets, although it may all be an elaborate illusion as a part of some geopolitical advantage or game plan.