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The Wilderhill Clean Energy Index has lagged the rest of the energy sector, but does lookto have also made the turn, and could be attempting to set up for a rally.
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The Philadelphia Oil Service Index (OSX) is back above the 200 area and has room to moveback toward the 240 area. A break above 240 would be very difficult, but would set up thepotential for significantly higher prices if it were to occur.
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The Amex Oil Index (XOI) is the strongest sector index in the energy complex at themoment.
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Technical Summary
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A low volume rally is likely on Wall Street on July 3rd. The key is what happens afterJuly 5, as the natural tendency of stocks to rally in the last day of a month and thefirst five days of a new month fades away.
To be sure, this bullish seasonal period has been extraordinary, as we had a momentumthrust over the last few days which still has to prove its lasting power.
We're still in the bullish camp, although not rabidly so.
Our position is that anything is still possible, such as a failure of the rally, while nottaking the current market lightly, given the fact that volume is on the reise and thatboth the Nasdaq Composite and the New York Stock Exchange delivered huge momentum thrustswith up volume swamping down volume 11 to 1 on the big board, and nearly 10 to 1 on theNasdaq on June 29.
Market breadth has improved significantly, while several key indexes have moved back abovekey long term resistance.
The strong sectors of late have been selected retailers, integrated oils, telecom, bankingand brokerage, and the real estate investment thrusts, suggesting that the market isbetting on an end to the Fed's rate hike cycle, a risky proposition, if the economycontinues to heat up.
The market had been set up for a bounce after hiting bottom near the S & P 500 110area on an intraday basis.
What makes the action on 6-29 most dramatic is that the up volume to down volume ratio hasexceeded 9 to 1 on the NYSE for the second time since June 15th and the third time for theNasdaq. This is what Martin Zweig described as a momentum thrust. Usually, two days of 9to 1 up volume to down volume are good enough to launch a bull market.
To be sure, the first two days of this unusual occurrence, June 15, and June 21, came onlight volume, which as we mentioned made them suspect.
But the rally on 6-29 came on heavy volume, of over 1.8 billion shares on the NYSE andover 2 billion shares on the Nasdaq.
To be sure, nothing is ever 100% guaranteed. But, we can't recall having seen three ofthese momentum thrust days in such quick succession before.
What's the risk? If you believe the Fed, bad data, or anything that suggests thatinflation is persisting can derail this market.
Otherwise, in the post 9/11 world, geopolitical surprises can derail any rally.
Commodities Look Up
Commodities are on the up swing.
Crude oil has steadily moved back above $70 with the $75 are providing key resistance. Theprice of crude has remained above $72 over the last few days.
Gold has is back above the $600 area.
Check our energy section for bond, gold, dollar, and currency recommendations.
What To Do Now
Traders and investors should be scouring their shopping lists for signs of strength,and should be building positions in strong stocks.
Investors should stay on the sidelines and wait for confirmation of a sustainable trend.Raise cash. Build a shopping list. Be patient.
Our ETF trading systems have been adjusted accordingly. The Fallen Angels have newrecommendations as well.
Remember, our Fallen Angels portfolio is designed for those with a longer term time frame,and offers both long and short recommendations.
Check all our sections daily. See tech, biotech, Fallen Angels, and timing systems for thelatest adjustments. Our ETF trading systems for energy, Spyders, Small Caps, andtechnology have also been updated.
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