August 10, 2008, Sunday Evening
Oil prices dropped again Friday with lower lows and lower highs yet the major oil stocks (CVX, XOM, COP), have started moving up. It is common to see stocks move up anticipating a future rise in the underlying sector. My anticipation of a move upward in oil stocks has been way too early and it looks like the oil prices could move lower, possibly to the $103-105 per barrel but we should still be seeing some move upward these coming 2-3 months.
The independent oil stocks are acting poorly and there is some concern that this group could go lower before having substantial rises—XTO, ATPG, COG, UNG and GDP.
The Dow had a nice move going higher than previous highs this last 4-5 weeks. The Nasdaq Composite and the QQQQ has made a much more decisive move up, indicating technology stocks have been stronger than the Dow stocks. This uptrend to higher highs is significant and an overall upward trend could continue for weeks if not months.
Some of the largest tech stocks MSFT, INTC, RIMM, and AAPL are examples of a nice move in the Nasdaq tech stocks.
If the market opens down slightly because of the Russian and Georgian war, the clue to look for is if the market ignores the war news and moves up, then this is a very bullish sign. Putin clearly looks like he is on a long term mission and my guess is we will see more of this behavior in the future from Russia.
As far as Iran goes, it seems most likely that this nuclear enrichment issue won’t end diplomatically. Israel must be thinking that if the USA votes in Obama, that its chances of the U.S. supporting any military strike on Iran would be diminished so that the best odds are when Bush is in office. Stay tuned on this issue.
Remember that the market has been on pins and needles just a few short weeks ago and reacted sharply to any negative news. We are now moving into phase where the market is ignoring bad news and will use any sign of good news to spur more buying. All bets are off though if any strike on Iran’s nuclear facilities occur.
JNJ and PFE are strong. JNJ is hitting new 52 week highs which is a healthy sign and the PFE chart looks very strong as well.
The financials may have a hard time moving higher with only MS, Morgan Stanley making a decisive move up.
The Agricultural chemical stocks are still on a path of lower lows and lower highs. Any trades that I would consider in this group will likely be swing trades for 2 or 3 days only.
The dollar is making a move up and is now at 75.85 on the Dollar Index compared to the March 17th low at 70.68. If oil and commodities move up the Dow, Nasdaq Composite and the dollar will reverse.
Keep your discipline with stop losses and position sizes that are relatively small.
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