UPDATE ON THE BROAD STOCK MARKET AND CRUDE OIL (1:30 pm EST)
After hesitating a bit mid-week, it looks like Wall Street and the broad stock market want to finish the week with an upward flourish. But today's surge may not be so bullish. While the NASDAQ is breaking above not only last week's high but also its all-time high of Jan. 26 (7,502), the DOW and S&P 500 are still below their highs from last week (although the S&P 500 is close at the time of this writing - but still far from its all-time high). This means we have a strong case of intermarket bearish divergence until those highs in the DOW and S&P 500 are taken out. We are still in the current reversal zone (it ends next Wednesday) so we could be seeing a top now or early next week followed by a significant correction. OK, that's the bearish argument for this market now. But there are also reasons to be bullish.
The DOW and S&P 500 (and possibly the NASDAQ) started new medium-term cycles on Feb. 9, and the start of a new cycle is usually bullish for the first month or two (as this one has been). The S&P 500 also looks like it will be closing the week above its 45-day moving average which is a bullish sign because it broke above this average and closed below it last week. Furthermore, today the S&P 500 is breaking above a strong downward sloping trend line that comes in around 2,760. If it closes the week above there, that is also a bullish indicator.
So we are still on the fence as to how this market will proceed from here, but we will likely know soon as current reversal zones come to an end next week.
Not surprisingly, crude oil seems to be taking its cues from the broad stock market. Crude is also at a turning point. It may be ready to rally to new highs from its current support around $60 (April contract chart), but if prices start falling below $58, crude could be turning very bearish. From our current perspective, the broad stock market could carry crude in either direction.
Still on the sidelines of crude oil and the broad stock market.
After hesitating a bit mid-week, it looks like Wall Street and the broad stock market want to finish the week with an upward flourish. But today's surge may not be so bullish. While the NASDAQ is breaking above not only last week's high but also its all-time high of Jan. 26 (7,502), the DOW and S&P 500 are still below their highs from last week (although the S&P 500 is close at the time of this writing - but still far from its all-time high). This means we have a strong case of intermarket bearish divergence until those highs in the DOW and S&P 500 are taken out. We are still in the current reversal zone (it ends next Wednesday) so we could be seeing a top now or early next week followed by a significant correction. OK, that's the bearish argument for this market now. But there are also reasons to be bullish.
The DOW and S&P 500 (and possibly the NASDAQ) started new medium-term cycles on Feb. 9, and the start of a new cycle is usually bullish for the first month or two (as this one has been). The S&P 500 also looks like it will be closing the week above its 45-day moving average which is a bullish sign because it broke above this average and closed below it last week. Furthermore, today the S&P 500 is breaking above a strong downward sloping trend line that comes in around 2,760. If it closes the week above there, that is also a bullish indicator.
So we are still on the fence as to how this market will proceed from here, but we will likely know soon as current reversal zones come to an end next week.
Not surprisingly, crude oil seems to be taking its cues from the broad stock market. Crude is also at a turning point. It may be ready to rally to new highs from its current support around $60 (April contract chart), but if prices start falling below $58, crude could be turning very bearish. From our current perspective, the broad stock market could carry crude in either direction.
Still on the sidelines of crude oil and the broad stock market.
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