June 19, 2008

If you’re prone to sea-sickness, then it may have served you well today if you never looked at an index chart. Nearly the entire day the markets were fighting between positive and negative territory. The bulls won the day, but not without a concerted effort on the part of bears to try to break support levels and send the markets lower.

What was the ultimate driver again today? Oil. Job Report was tame and had little effect on the market, but the uncapping of fuel prices in China caused oil to drop nearly 4%. Could we have seen the peak in oil? Not sure…we need to see major support levels broken and a firm downward trend in place before we risk any substantial capital on such a trade. Should oil be primed for the long-awaited bubble burst, then expect the markets to rally as a result, but expect the oil-longs to make repeated attempts to drive oil higher, and when there has been numerous attempts that fail, that may be when you need to start putting some money to work on the short side.

Today was a positive day for the bulls no doubt, they found support at the months lows which was extremely important for both the NASDAQ and S&P. But by no means should the bulls consider themselves out of the woods yet. Confidence is shaky at best, and sentiment is still very negative. Even the slightest news-piece can see a steep sell-off. Only a month ago, today’s job report would have sent the major indices up probably 1.5%. Instead for most of the day we wrestled between positive and negative territory. Just think about that…

Here’s the NASDAQ and S&P Charts…