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Struggling

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Stocks look like they want to move higher, but a rash of earnings warnings is keeping buyers from jumping in.

The Dow is down 7, thanks mainly to Eastman Kodak's (EK) $4.73 drop. McDonalds (MCD) and Merck (MRK) are trying to offset the Kodak's loss, but neither is currently up more than $1.

The Nasdaq is two points in positive territory on the strength of Internet and networking stocks. 1.5% drops in software and biotechnology are holding back any gains.

October Crude Oil Daily Chart

After spiking up to $29.25 on Monday, October crude oil futures have fallen back to $27.45. Technically this is a pull back to the neckline of a head and shoulders bottom. Fundamentally, oil supply fears are starting to fade. Comments from Secretary of Defense Donald Rumsfeld that the U.S. is declaring war on terrorism, not necessarily the oil producing states that support them and comments from OPEC that they might reverse their one million barrel per day production cut are helping to keep oil prices under control. $27.40 should be an interesting level for crude oil.

CBOE Oil Index Daily Chart

The lack of disruption to oil supplies has hurt oil stocks. The CBOE Oil Index (OIX) was poised to move higher, but has dropped 6.6% over the past two days. Today's 1.24% decline places the index within 2.5 points of its April and July lows. With OIX oversold, this could be the level where it tries to find support.

Texaco and Amerada Hess Daily Charts

While OIX is trying to find support, some of its components might have some more room to fall. Texaco (TX) is currently testing the 200-day moving average. Should that support level be lost, TX could fall an additional $2.76 to $64. After losing over $7 in three days, Amerada Hess (AHC) is trying to find support at $70. $66.25 would be the next solid support level.

Jeffrey Canavan
Assistant Analyst
www.premierinvestor.net

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