August 4, 2008
Moderate day to the downside for the major indices. Interesting phenomenon though occurred today, and that is, the markets were unable to rally despite the price of oil dropping $4.23/barrel. Anytime before, the market would have seen probably 1% – 2% to the upside. But it didn’t. Instead we saw the Nasdaq and S&P sell off about 1%. So how would the market in general and stocks in particular have done if oil was breakeven on the day or up a couple of dollars? Assuming because of oil’s drop, that there was some support lent to the market from going down further than it did, I’m guessing we could have seen a pretty rough day out of the stock market had oil been on the rise.
On the subject of oil, it will be interesting to see whether oil will rebound from the critical support levels that it now holds on to at $120/barrel. A break of that price level could see oil drop another 5% – 6%. It’s a guessing game at this point but don’t expect the bulls of oil to give up so easily.
Tomorrow is when the Fed meets, and we could see some action from the markets in response to the FOMC Statement which is scheduled to be released at 2:15pm. Unless something drastic happens, we don’t expect them to do anything with the rates, but will be curious as to what they include in the statement itself and the general reaction from investors as a result.
Here’s the Nasdaq and S&P Charts…