Oil prices are under renewed selling pressure today as the June Light, Sweet crude oil futures (cl03m) $26.67 -4.71% fall $1.32 as "certainty on Iraq" and today's Department of Energy report showing a 9 million barrel rise in crude stocks for the week ended April 18 has "Texas tea" bulls headed to the sidelines, but gives lift to stocks as previously feared higher oil prices begins to be discounted among market participants.
A quick look at the June crude oil futures (cl03m) bar chart has this contract back below its 200-day SMA of $27.39, which this contract has been teeter tottering either side of in recent weeks after breaking below its upward trending 50-day SMA of $31.38 on March 17th. While not necessarily correlative to broader market action, it is notable nonetheless that the break of the 50-day SMA in the June contract came very timely with the mid-March rebound in the major equity indexes.
In a constant "effort" to uncover some of the "whys" for market action, I'm just noting some of the similarities in crude oil prices with what we've seen in the major indexes in recent weeks, and perhaps here today as the major indexes have built gains above yesterday's highs in today's session.
Dorsey/Wright and Associates provides a full gamut of "energy" futures point and figure charts, which futures traders will use to attempt a forecast to extreme peaks and lows with the various bullish and bearish vertical counts along with chart patterns that develop. One need look no further than commodity futures to truly understand the impact of supply and demand and its impact on prices.
In early January, the June crude oil contract "unleashed" a bullish triangle pattern when the contract traded $28.75. While Professor Davis' study did not encompass futures, it's interesting that this powerfully bullish pattern may have hinted at a 30.9% rise in the following 5-months. From that level, this contract rose to $34.75 at its peak in March, coming up short of a 30.9% gain, which would have been $37.63. Trading on the $0.25 box size has been choppy in recent weeks, but the April high of $29.50 looks to be the near-term level of resistance after a recent rally attempt to $29.00 came up of $29.50. While this contract is currently showing a supply/demand "buy signal" associated with its chart and bullish price objective of $32.50, this bullish count would be negated with a trade at $26.25. The point and figure chart currently exhibits a series of lower highs and lower lows, with recent April low coming at $25.50. It is interesting to note that the current levels of trade come right at the apex of the "bullish triangle" found in January, as if traders are currently finding supply/demand at some point of "equilibrium."
Tomorrow, OPEC meets to discuss potential productions cuts.
The major indexes continue to hold yesterday's gains after a choppy open, which saw the major indexes drip fractionally red. Current trade finds the Dow Industrials (INDU) 8,497 +0.14% holding a 12-point gain, the broader S&P 500 Index (SPX.X) 916.34 +0.54% and narrower S&P 100 Index (OEX.X) now starting to make fractional progress above their WEEKLY R2s (levels I didn't think the indexes would trade this week), while the NASDAQ-100 Index (NDX.X) 1,108.41 +0.54% trades levels not seen since late- November and early December. The NASDAQ-100 Index Tracking stock (AMEX:QQQ) $27.57 -0.51% did fall back below its WEEKLY R1 of $27.37 earlier this morning with a trade at $27.26, but similar to what we did see in the S&P Banks Index (BIX.X) 289.35 +0.44% last week, found support at its MONTHLY R1 of $27.24.
While the BIX.X and NDX/QQQ have nothing in common as it relates to "financial" exposure in the NDX/QQQ, this technical action and finding support at upper levels of MONTHLY resistance levels, which have been broken and begin serving support lends to bullishness in my opinion.
I've heard several floor traders begin to discuss the "importance" of 900 support in the SPX. This is interesting on two fronts. One would be yesterday's bullish triangle pattern being triggered in the SPX at 900, but also the MONTHLY R1 from our pivot analysis at 899.80. I could say "three fronts" as 900 has been a "psychological" level that has tended to influence market psychology.
Treasuries remain unchanged in today's trade and most likely influenced by this afternoon's 02:00 PM EST release of the Fed's Beige Book. There are no "numbers" associated with this widely read economic data, but compiles multiple observations from various regions in the United States regarding economic trends that the regional Fed banks are seeing.
Despite a rather lackluster trade and modest gains for the major indexes, trade volumes are relatively heavy. The NYSE currently shows 876 million shares traded, while NASDAQ has breached the 1 billion mark at the 01:00 hour.
Market internals at the NYSE show advancers outnumbering decliners by a 3 to 2 margin, with 146 stocks having traded a new 52-week high compared to 18 stocks trading new 52-week lows.
NASDAQ reports advancers outnumbering decliners by a 4 to 3 margin with 116 stocks trading new 52-week highs and 18 stocks trading new 52-week lows.
With the major indexes either trading or close to trading their WEEKLY R2s, I'll make some notes as to this afternoon's trade volumes. While a WEEKLY R2 doesn't necessarily limit further near-term upside, we would expect some potential selling near these level based on the trading of a "range" and upper-end of the range. It would be my thinking that equity bulls would want to at least see some steadiness going into the weekend and ability for the indexes to hold the upper-end of the WEEKLY range. This would allow for next WEEK's pivot levels to move higher.
I continue to get a scattering of e-mail regarding the pivot analysis levels regarding their derivation and potential use. This is discussed in an "Ask the Analyst" column at both the OptionInvestor.com and premierinvestor.net sections. The article was titled " Pivot Analysis to define levels and range" and was written on January 19, 2003.
Notable new 52-week highs in today's trade has Stratasys (SSYS) $23.02 +15%, Sepracor (NSDAQ:SEPR) $19.85 +9.2%, Career Education (NASDAQ:CECO) $58.48 +10.94%, Novastar Financial (NYSE:NFI) $46.70 +7%, Station Casinos (NYSE:STN) $23.23 +7.34%, Amgen (NASDAQ:AMGN) $63.52 +4.25%, Centex Homes (NYSE:CTX) $64.02 +4.2%, Apollo Group (NASDAQ:APOL) $55.94 +4.15%, Pharmaceutical Resources (NYSE:PRX) $46.40 +4.03%, F&M Bancorp (NASDAQ:FMBN) $45.70 +1.86%, Internet HOLDRS (AMEX:HHH) $31.86 +3%, eBay (NASDAQ:EBAY) $93.34 +4.6%, Yahoo! Inc. (NASDAQ:YHOO) $25.99 +1.28%, Expedia (NASDAQ:EXPE) $57.78 +2.5%, Iron Mountain (NYSE:IRM) $40.28 +1.56%, St. Jude Medical (NYSE:STJ) $51.29 +1.54%, Knight Transport (NASDAQ:KNGT) $23.65 +.07% and Royal Bank of Canada (NYSE:RY) $40.96 +0.34% to name a few.
New 52-week lows are limited with Champps Entertainment (NASDAQ:CMPP) $5.59 -21.7%, China South Airlines (NYSE:ZNH) $10.12 -3.61%, China Mobile (NYSE:CHL) $9.69 -3.58%, China Unicom (NYSE:CHU) $5.16 -4.26% and Mitsubishi Tokyo Financial (NYSE:MTF) $3.28 -3.58%. Hmmm.... you don't think all this "China" theme has anything to do with the SARS virus do you?