Oil Continues Down Trend as Stocks Continue to Consolidate...

DJIA - 231.77, -2.50% SP500 - 30.35, -3.08% NASDAQ Comp. - 73.35, -4.14% Russell 2000 - 16.19, -2.96% Exchange NYSE NASD Advancing 1,013 832 Declining 2,430 2,059 Oil $70.89 -$3.36 Gold $768.00 -$22.00 $SOX 234.09 -9.83 Strongest Sectors: XLV -0.29%...XLI -0.89%...XLP -0.94% Weakest Sectors: XLK -5.23%...XLE -4.54%...XLB -4.21% Sector Watch Up Trending: Sideways: Down Trending: XLP, XLF, XLY, XLV, XLI, XLE, XLU, XLB, XLK Oil prices fell again on Monday fueling a rise in airline stocks but leading commodity related energy, solar, coal, gold, steel and Ag-related stocks. We re-mentioned airline stocks AMR, CAL, DAL, LCC and UAUA last week in our audio commentary Thursday morning and warned yesterday not to lose focus on oil’s down trend. We were asked last night if oil was still in a down trend in face of OPEC’s emergency meeting on October 24 to call for a cut in oil production. We responded with an emphatic “yes, oil is still in a down trend until we see a higher high and a higher low." We also said we expected that the bounce in commodity related stocks on Monday was more likely a bear flag counter trend bounce and to watch for bearish entry opportunities if oil prices moved down. Many of those stocks gave bearish entry opportunities today. All sectors moved lower on Tuesday. The overall market continues in a consolidation pattern which we noted on October 10 could be the beginning of the end of the down trend. We remind everyone that consolidation base building periods after deep sell offs generally take several weeks before a clear up trend is established. So Tuesday’s action is totally consistent with what is typical. If you are uncertain about how bottoms consolidate go back and study the many bottoms that have occurred during the past several years. Earnings reports continue this week. Index Commentary The DJIA barely moved above Friday’s high and then moved lower closing in the area of Monday’s S1 level…continues in sideways congestion. The SPX barely moved above Monday’s high and moved lower closing below the area of Monday’s S1 and above S2…continues in a sideways congestion. The Nasdaq opened lower and closed near Monday’s low…Friday through Tuesday is forming a pennant pattern…continues in a sideways consolidation pattern. The RUT did not trade above Monday’s high and moved lower forming and inside day…Friday through Tuesday is forming a pennant pattern…consolidating in a potential W pattern. Stock Commentary DECK formed another inside day…pennant forming since Friday. AAPL formed did not confirm Monday’s hammer…moved lower on 55 million shares. BIDU formed doji and a potential bearish harami…earning tomorrow 10/22. ORCL formed shooting star…potential bearish harami. WYNN confirmed Monday’s dark cloud cover and bear flag break on Tuesday. SHLD fell to a new 52-week low. CTSH fell to Monday’s low…watch for a move below the low of the high day which was Monday. HANS rose to 30 DMA and fell…formed shooting star and potential bearish harami. C failed to confirm Monday’s bullish harami…moved lower. Tuesday’s Action Moving Up: COH, UAUA Moving Down: POT, BIDU, CF, AEM, MON, AGU, CNX, X, NIHD, FSLR, AMZN, DRYS, CLF, PCLN, ANR, GDX, MOS, IPI, SINA, ESRX, FMCN, LDK, INFY, DECK, V, BUCY, ZION, KRE, HANS, SCHN, GRMN, BTU, MEE, NUE, FWLT, PNRA, BUCY Intermediate Term Market Trend: Down Short Term Market Trend: Neutral