Stocks Negatively Reverse As Oil Approaches $110/Barrel
Monday, March 07, 2011
Stock Market Commentary:
Stocks negatively reversed (opened higher but closed lower) on Monday as WTI crude oil approached $110/barrel and Greece’s credit rating was cut. The current crisis in the Middle East remains in flux which is putting upward pressure on oil and gold and some modest pressure on equities. The benchmark S&P 500 is up nearly 100% from its March 2009 low, and still about -16% off its all time high from October 2007. On average, market internals remain healthy as the major averages bounced after finding support near their respective 50 DMA lines in late February.
Stocks Negatively Reverse As Oil Approaches $110/Barrel:
Stocks opened higher but the bears quickly showed up and sent stocks lower after Moody’s Investors Service cut Greece’s credit rating and crude oil approached $110/barrel. Oil prices surged to fresh post-recession highs as forces loyal to Moammar Gadhafi pounded rebels near a key oil port in Libya. U.S. gasoline prices have also jumped markedly over the past two weeks as oil jumped over 20% as democracy spreads in the Middle East. AAA reported that gas prices have jumped an average of $0.39 cents per gallon since the Libyan crisis began in mid-February. Analysts believe that the jump in gas prices are causing motorists to pay an additional $146 million per day for using the same amount of fuel which eventually will have an adverse effect on the economy. The national average price at the pump hit $3.509 per gallon on Monday which serves as an indirect tax on both consumers and businesses.
Market Action- Rally Under Pressure; Week 28
It was encouraging to see the bulls show up and defend the major averages’ respective 50 DMA lines in November, January, late February, and early March. From our point of view, the market remains in rally-mode until those levels are breached. The tech-heavy Nasdaq composite and small-cap Russell 2000 indexes continue to lead evidenced by their shallow correction and strong recovery. If you are looking for specific high ranked ideas, please contact us for more information.
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