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Oil, S&P, JPMORGAN All Rally

This week is going to be a busy one. After a big rally at the end of the week, the S&P futures will be looking at increased earnings and economic reports and Ben Bernanke talking to Congress about the economy. After a shaky start to last week, the Dow and S&P snapped a six-day losing streak. The Dow ended up 0.04%, up 4.58% on the year. The S&P closed out the week up 0.15%, up 7.89% year to date, and the NASDAQ closed out the week down 0.98%, up 11.64% year to date.

Even before JPM's stock jumped on Friday, crude oil and the S&P had already started to move higher. Crude oil was up 2 bucks and down 2 bucks all week but ended on its highs. The S&P acted in the same manner, rallying and selling off but going out on the highs.7 15 2012 10 36 38 PM 640x468 OIL, S&P, JPMORGAN ALL RALLY futures, trading, commodities, trader, invest, speculate, SP500, dow, nasdaq, Treasury, Bond, Note, Newsletter, education, risk, reward, stock market, bond market

JP Morgan

The massive trading loss that when revealed started at $2bil is now up to $5.8 bil and could go to as high as $7+bil. Last Friday the bank was forced to restate its first quarter earnings after it found out that traders have been trying to hide the losses. "The firm has recently discovered information that raises questions about the integrity of the trader marks and suggests that certain individuals may have been seeking to avoid showing the full amount of the losses in the portfolio during the first quarter," JPMorgan Chase said in a filing with the Securities and Exchange Commission. On Friday the bank reported second-quarter profits of $5 billion - down 8.7 percent from a year ago - despite the trading debacle.

7 15 2012 10 37 13 PM 640x452 OIL, S&P, JPMORGAN ALL RALLY futures, trading, commodities, trader, invest, speculate, SP500, dow, nasdaq, Treasury, Bond, Note, Newsletter, education, risk, reward, stock market, bond market

Crude
Crude oil broke a four-day losing streak last week to finish out the week gaining 1.2% to $87.10, the highest close since July 5. So far crude oil prices are 12% below where they were this time last year. While the 100-day and 200-day moving averages are $96.16 and $96.07, the big level most crude traders are watching right now is the 50-day at 87.18. According to the CFTC Commitments of Traders report on July 13, money managers reduced net-long positions by 5.1% in the seven days ended July 10, and with China having its seeing its biggest slowdown in 3 years. According to Lundberg, the average price of a gallon of gas in the U.S. fell 6.77 cents in the past three weeks to $3.4103 , down 20.47 cents from a year ago.

7 15 2012 10 38 28 PM 640x452 OIL, S&P, JPMORGAN ALL RALLY futures, trading, commodities, trader, invest, speculate, SP500, dow, nasdaq, Treasury, Bond, Note, Newsletter, education, risk, reward, stock market, bond market

S&P

The S&P 500 futures have been back and filling for the last two weeks and have been unable to break the 1300 level. After taking out sell stops down to 1320, the S&P has rallied sharply. Last week the Pit Bull's rule about looking for a Thursday / Friday low the week before the expiration worked great, but today we will see if there is any follow-through on Mutual Fund Monday. There is a big line of buy stops that begins above 1353 and goes all the way up to 1365, and that's where we think the S&P may be headed as we go into the July expiration.

Our view:

Despite the news out of China and the overall global slowdown, the S&P is trying to move higher. Friday's S&P cash study worked perfectly (up 19/down 9 of the last 28 occasions). Today we lean to buying weakness, but we also want to point out the weakness in the EC and crude. Look for an early morning pullback and then a push back up. As always, keep an eye on the 10-handle rule and please make sure you use stops.

For today:

  • It's 6:00 a.m. and the ESU is down 3 handles at 1348.75, crude is down 39 cents at 86.71 and the EC is trading 1.2194, down 57.
  • In Asia 7 out of 11 markets closed higher (Hang Seng +0.15%, Shanghai Comp -1.74%).
  • In Europe 9 out of 12 markets are trading higher (DAX unchanged, CAC -0.17%).
  • The main headline this morning: "World Stocks Muted as China Cautions on Economy."
  • Today's economic calendar: retail sales, Empire State mfg survey, business inventories and earnings from Citigroup, Charles Schwab and Gannett.
  • VOLUME: 1.75mil ESU and 6.8k SPU traded
  • SPREADS: 512 SPU/Z spreads traded
  • FAIR VALUE: S&P -3.40, Nasdaq -7.00

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.