We've had a lot of trouble with Thursdays and this was a pretty good one. Last year we opened January with a 350 point gain in a 4 day week, so I'm not going to do any victory laps just yet (especially as the entire gain was wiped out 2 weeks later), but that was coming off a very choppy year where no gain went unpunished.
Is it different this time? Last January oil led the rally, with crude surging from $56 in November and December to $68 at the end of January. Today we crossed back to $55.59, the lowest price for oil since June of 2005, when a 600 point Dow rally was killed by rising crude prices. When oil settled down at $56 in late 2005, the Dow picked up 800 points.
It was a surge in oil back above $60 in the last week of December '05 that halted the Dow at 11,000, and a surge in crude to $75 in April that drove the market from 11,500 back to 10,700 in June. We did recover, so, yes, we can afford higher oil prices -- but we certainly don't like them!
Today we liked it! We tested and held all my levels early on which gave us the confidence to initiate a buyfest as we added a bunch of new positions, even as we continued to short oil:
- Dow 12,400 held after a brief test.
- Transports led the way, testing the recent high at 2,720.
- S&P must hold 1,410 or it will be testing the 50 DMA at 1,400.
- NYSE was our weakest index, falling below 9,100 twice, and not getting back over 9,150 should be considered a problem.
- Nasdaq took a brief dip below 2,425 but bounced back to lead us higher! As I said this morning, "tech must take leadership."
- The SOX did very well (up 2%) but failed to hold yesterdays high. They broke out of the range though finishing above 470!
- Russell held 780 exactly but still needs to take us to 800.
Oil was once again the star of our show, plunging 5% to finish at $55.59, just .06 under the level I predicted when I said, "Oil resistance levels are $57.65, $56.20 and $54.76 but if the dollar holds 84 we are likely looking at .75% less so the key numbers here are $57.21, $55.66 and $54.34."
I know you guys think I make these numbers up -- but I don't!
Inventories did not go well today with a slight draw in crude offset by a huge and surprising 5.6Mb build in gasoline. My take on the situation as they tried to pump the oil sector: "This is insane -- they are trying to spin this on CNBC and the oil stocks are rallying on what amounts to a 5M barrel build in the middle of the winter. I'm not selling anything on this news -- I'll double down anything they want to give me a bargain on!"
We not only stayed in oil through the BS (and short-lived) run-up, but we picked up some additional bargains along the way!
We were helped by another up move in the dollar, testing the falling 50 DMA at 84.35 -- tomorrow will tell the tale as it will take a lot for us to break back up. Gold hung on to the 50 DMA at $631 but looks ready to give up hope...