Oil Hits New High, Stocks Fall and Bounce

DJIA - 128.48, -1.14% SP500 - 13.90, -1.11% NASDAQ Comp. - 18.77, -0.83% Russell 2000 + 4.51, +0.67% Oil closed at $145.08 up $3.43 Oil reached a new intraday high and closed just 21 cents off its all-time closing high on July 3. Prices moved higher on continuing tensions over Iran’s missile testing combined with Brazilian oil workers saying they will strike Petroleo Brasileiro’s (PBR) for five days. They are seeking full pay for the travel day from the mainland to the platform. A news report this afternoon indicated that struggling Fannie Mae (FNM) and Freddie Mac (FRE) would receive Fed help. This spurred stock buying and the indices made a strong move up from their lows. Apparently the Fed choose not to confirm the reports which caused stocks to give back some of the gains. Earnings season started this week and really gets rolling next week, be mindful of the release dates for the stocks you are trading and trade accordingly. Next Friday, July 18, is options expiration. It is always sound strategy to close July options early. Be mindful of extra volatility that can take place on options expiration day. Index Commentary The DJIA bullish harami on Thursday did NOT confirm on Friday. The Dow moved lower to 11,000 and found support and rose through the short-term intraday resistance of 11,075 went slightly positive for the day and then fell into the last hour of the day. Friday was an intraday break of the 11,100 support of the last eight days which had been forming a horizontal bear flag. The intermediate term (multi-week) price target for the DJIA is 10,400 from the old support of 11,750. The area where the DJIA has been pausing is the mid-point between 11,750 and 10,400, and is an important support area. The lower shadow on Friday’s candle could represent a short-term area from which a counter trend support bounce could occur. The SPX bullish harami on Thursday did NOT confirm. The SPX closed above Thursday’s low and the lower shadow could provide short-term support for a counter trend bounce. The Nasdaq formed a white high wave (large upper and lower shadows) spinning top meaning the Nasdaq closed above its open while closing below Thursday’s close. The bullish harami on Thursday did NOT confirm on Friday. Friday’s close was above the short-term support area of 2,215 to 2,225. The SOX found support once again at the 340 area of the index and formed a hammer and a bullish harami on Friday. This might be indicative of some short-term buying that could give a counter trend bounce to the Nasdaq. The RUT formed an outside day white candle that closed above the R1 resistance (and below the R2 and R3 level) of Wednesday’s large black candle. The RUT is the strongest of the four broad indices. This is another clue of a possible short-term bounce in the markets. Stock Commentary USO, the ETF that trades oil futures contracts, followed through on Thursday’s bull flag support bounce with a resistance break out today and closed at 117.39. The chart suggests a price target of 124. Keep in mind that the underlying price of oil influences the price of this ETF and is likely more important than the chart in this instance. Coal sector stocks, still in a long and intermediate term up trend, started the day strong pulled back and then came on and finished positive for the day. KOL, the coal industry ETF, formed a higher high and a higher low and closed above its 50 DMA and is still below its 20 and 30 DMA. ANR in a support bounce off its 50 DMA beginning July 8 formed a higher high and a higher low and closed above its 20 DMA. BTU broke above the high of the low day on Friday and closed above its 50 DMA. It is still below its 30 and 20 DMA. CNX broke above the high of the low day on Friday, closed above its 50 DMA and is still trading below its 20 and 30 DMA. MEE formed a higher low and higher high today continuing it support bounce off of its 50 DMA on July 8. Closed above its 30 DMA and is just below its 20 DMA. Ag-related stocks: AGU consolidating, for the third day between 97.50 and 102.50, after a support bounce off of its 50 DMA on July 8 closed above its 30 DMA for the straight day. CF rose for the third straight day after bouncing off its 50 DMA on July 8 is now trading above it 20, 30, 50 and 200 DMA. Resistance is at 173. MOS closed 10 cents above its 30 DMA on Friday, rising for the third straight day after a support bounce from below its 50 DMA. It is still below its 20 DMA. POT consolidating for the third day closed 26 cents above its 30 DMA and is still below its 20 DMA. IPI formed a piercing line while bouncing above its 50 DMA in a two-day bull flag. MON continued to consolidate in the 115 to 120 are just above support of the hammer on Tuesday. BIDU broke support (old resistance) and fell back to its double bottome support. FSLR paused in its recent support bounce rise with a white spinning top that found support at Thursday's S1 level and the 20 and 30 DMA. AAPL confirmed its bearish harami on Thursday and slightly broke its bear flag formation. RIMM broke support and has a price target of 102.50. X formed an inside day that is forming a pennant pattern from Wednesday. MA formed a spinning top inside a pennant forming since Tuesday July 8. V formed an inverted hammer inside a pennant forming since Tuesday July 8. CELG formed a hanging man pattern and an inside day. Friday’s Action Moving Up: ANR, MEE, CNX, MA, USO, CF, MOS, CLF, SCHN, BTU, IPI, JASO, POT, AGU Moving Down: BIDU, DECK, GS, RIMM, AAPL, PCLN, LEH, V, AMZN, DRYS, ESRX, X, SOHU, STRA, FWLT, MER, IBM, NUE, GRMN, CELG, FSLR, MON Intermediate Term Market Trend: Down Short Term Market Trend: Neutral