A big low volume drop on weakness in the financials pushed the market back towards the bottom of the channel.  This is going to be my last post for the next couple weeks, but it doesn’t look like there are going to be any changes with the fundamentals any time soon anyway.  The biggest thing I see in the future is the upcoming election, which may start having some effect on the market as it inches closer.  Other than that, keep watching the usual suspects (oil, banks, retail, housing, etc.).  See you in September!

The market rallied today as oil dropped again.  Or if you want to believe what I just talked about yesterday, you could say the market rallied today because the US Dollar rose again.  Of course the cause of any given day’s market movement can never be attributed to a single news item, but the plunge of oil has definitely held a close correlation over the past several weeks.  Oil has been dropping without pause for a while now, so turn up the correction watch and don’t get caught being too greedy if you’ve been lucky enough to ride this wave down.

Richard often leaves good comments here about the US Dollar’s weakness, so I decided to add my own notes about it.  You could look at charts of the USD against the Euro or some other specific currency, but for a quick idea it’s helpful to check out the US Dollar Index ($USD on stockcharts.com) which just compares it against a basket of common currencies.   As you already know, the USD has been diving for a while, but this chart puts the recent rally into perspective a little.  With the huge national debt and inflation not getting any better, I don’t see this long term downtrend being broken at this point. 

So what do you do with this info?  Obviously you could play the forex markets, but that’s a whole different ball game if you’re used to equity trading.  Something a little closer is to trade commodities, i.e. metals or oil.  As the dollar goes down, these things typically go up.  They were quite overbought before, but have been getting back in line recently—almost to a buyable point again.  There are also plenty of stocks that are tied closely enough to these markets if you want to stick to equities, so keep an eye on them if the longer term trend of the USD heads back south. 

The day was rocky again, diving early on, bouncing back, then plunging back down to close the session out.  Oil and gold had a little rebound, but nothing trend changing.  I’m still in a waiting mode until the market can show one way or the other.  Till then…

Sorry for the lack of posts over the past few days.  I was out of town, but I’m back now and it looks like things haven’t changed.  The market has been continuing its volatility, inching higher as crude continues to drop.  The financial sector continues to be weak, causing the tumble today.  I’m still expecting a drop out of this upward channel that’s formed over the past month, but breaking the 128-130 level shows some continued resilience.  Keep in mind that we had a drop without pause from May to July though, and rethink any ideas you have that this is anything more than an upwards correction. 

I’m not so sure you could call today a follow through with the weak volume, but the day definitely ended on a high note.  Oil took the credit for the drop again, but slumping oil will only push the market so far.  Nevertheless, it would be hard to hold on or open new short positions if the market breaks the 130 mark.  After the dreary June, the market still has plenty of pent up bullish steam. The valid plays in my opinion are to either enter here with a tight stop on a breakout or hold tight until the reversal occurs.  I don’t believe in the fundamentals enough to attempt a play to the bullish side for anything longer than a day.

The markets surged today after the fed made the fully expected no rate change call.  The stagflation risk looms though with the fed acknowledging inflation worries as the reason for not lowering rates (as opposed to saying the economy is doing fine and doesn’t need a rate cut for growth).  For such a big jump, the market had pretty weak volume today.  That leads one to believe that the market will not be able to sustain any push above 130, but as always you should trade what’s happening and not what you believe.  We’ll see if tomorrow brings any sort of positive follow through.

Crude plunged again and the whole market went down.  There’s really not much else to say about it.

The market was down again after more bad news in the economy.  Oil should continue to be interesting this week along with the multitude of earnings calls still coming out.  Expect more choppiness for the time being.