Crude Oil failed to build on Wednesday’s gains and sold off sharply today, providing a boost to the stock market. Techs appear to be set to take over the leadership from commodity based stocks, which got hit hard today. Interestingly, bonds went the same direction as Crude Oil, as rates rose as bond prices reversed course today. In the face of this action, the Dollar held very steady.
Other commodities were generally mixed today, with a bias to the downside. I think we are at a tipping point here. Crude Oil fell on news that Saudi Arabia intends to boost production by 200,000 barrels, and China is reducing some of its gasoline subsidies to consumers there. It was also noted on CNBC today that the U.S. still has not tapped into any Iraqi oil. Four big oil companies will now be involved in bringing that oil to market. Nonetheless, the market still needs to prove that it wants to go down. The first psychological level to the downside is $130, and there is a sizable gap between about $128.20 and $131.86 that can be filled. Meanwhile, the 20 day moving average on the August contract is about $131. Still, primary support is all the way down at $122.50.
If Crude Oil can drop significantly, there could be a sizable rally in the stock market. But, in spite of today’s rally, it was nowhere near big enough to suggest the current downtrend is over. Still, it is clear that Tech stocks will start to take over leadership.
The market bias for Friday is slightly to the long side. Potential long trades include FLS, JOYG, CMI, FSLR and LDK.
Good Trading!
Scott Cole
www.bestdaytradingstocks.com
www.kungfutrader.com
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