Wheee, that was exciting!
Things are certainly getting interesting now. We had another test of our levels in the morning but zoomed to new highs in the afternoon, giving back about half our gains into the close. We caught the move right at the open and my 9:42 comment to members, as the market fell to the day's low was: "Lots of early selling pressure, watch the Nas to hold 2,400 and NYSE 9,200, I think we will, this is just early panic and we’re getting a nice drop in oil (off 2%) and XLE (off 1.5%) and the financials are off another 3% over CS so if you don’t have those, don’t worry yet…"
Needless to say we held all the levels I set up for the week and we're doing it with the SOX leadership we wanted and we're finally getting our pullback in commodities but they, of course, are based on a dollar bounce (also predicted by me, thank you) and we've been teased by the dollar before so it's really going to have to show us something today before we take it home to meet our parents…
We can ignore the NYMEX for now as no amount of manipulations can save oil from a rising dollar and Trader Mike points out that we may be seeing an "Adam and Eve Bottom" on the buck, which Trader's Wheel defines this way: "The Adam and Eve Reversal demonstrates the importance of the center peak in the formation of Double Bottoms. A very sharp and deep first bottom on high volume (Adam) forms this DB pattern. The stock then bounces high into the center retracement and develops a longer and more gentle, rolling second bottom (Eve) on relatively low volatility. Price action then constricts into a tight range and the stock breaks strongly to the upside."
We'll keep our eye on gold, which is a more honest indicator of the dollar's prospects than oil and looks to be breaking down to test the 200 dma at 820 but THAT is down another 9% from here and 9% takes the dollar all the way past its 50 dma at 76.5 and if one crossed down and the other crosses up, we could be in for some real fireworks as several Trillion dollars of technical bets get unwound on each side, including GS clients who fell for this BS report warning oil could go to $200.
I already pointed out how far off base this guy was back on March 11th but, since more people follow random Goldman analyst's advice than mine, oil spiked up 15% since then, drawing in another round of bagholders who are taking the term "black gold" way too seriously. At the time I said the CRB should retrace to 370 and I do seem to be influential enough that the index did plunge from 422 to 377 within 10 days of my top call. This week we climbed back to 420 and I've been very pleased to see the double top put in on commodities, let's just hope it sticks! We're still looking for 308 in the long term, so there's a long way to go before commodities get real.
We'll see if this rally is real as MSFT missed this evening but AXP did better than expected with trends indicating consumers are still spending, it's just their money is currently being diverted from the real economy and into their gas tanks. It will be a very, very powerful thing if we get a $20 drop in oil, allowing $1.7Bn global petrodollars a day to find their way back to other parts of the economy.
Let's look for continuing indications of rotation out of commodities and into tech. MSFT's miss will be a good test for the Nasdaq, who had a key breakout of 2,400 – holding that will make me feel really good but we still have a lot of data ahead of us next week so we'll be buying back the puts we sold and holding our index puts naked over the weekend – just in case!
