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The Wilderhill Clean Energy Index is inceasingly weak.
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The Philadelphia Oil Service Index (OSX) seems to have broken down with 200 being animportant level to keep an eye on.
Chart Courtesy of StockCharts.com
The Amex Oil Index (XOI) has also broken down, and is now trading well below its 200 daymoving average.
Technical Summary:
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Bouncing Back On Weak Oil
Stocks look ready to try to regain the upper hand, at least based on very earlyindications from the U.S. futures, and European trading.
The last two days of trading last week were fairly ugly, although not enough to derail theup trend.
Technically, the market remained in decent shape, as no major support levels on the S& P 500 or the Nasdaq were hit.
The NYSE advance-decline line and the number of stock making new highs on the NYSEcontinue to predict higher prices.
Therefore, our strategy remains both stock oriented, as well as mindful of the overalltrend in the market.
Diversification is also important, between selected technology stocks, selected healthcare stocks, and the financial sector.
Aggresive traders should have open positions long the bond market, and short the energysector as well.
Those who have followed our long recommendation on bonds, as well as our shortrecommendations on energy have done well,
The important concepts to grasp at this time are selectivity and mindfulness of theoverall market. Not all stocks in all strong sectors are likely to do well, which is whatmakes ETF and mutual fund investing a bit tricky in the current market.
Volume and breadth trends have been generally positive, although not overwhelmingly so.
In other words, stock selection and more patience than in other rallies will lead tobetter rewards.
Commodities Remain In Bearish Trend
Commodities were increasingly weak over night.
Natural gas was trading below $5.
Crude oil was below the $60 area.
Gold is still testing the $580 level.
Check our energy section for bond, gold, dollar, and currency recommendations.
What To Do Now
Work within the premise that strong stocks are worth owning, at least on a trading basis,as long as each individual position continues to show strength.
Slow and steady position building remains the key to success. Look for opportunities infinancial and technology stocks.
Visit our technology and Fallen Angels areas for trading ideas everyday.
Active traders should have some open short positions in energy. See our energy section fordetails.
Stay patient, and see if the market can continue to right itself. See all our sections fordetails on new potential picks.
The bond market remains interesting. See our bond trading model, on our energy page.
Our ETF trading systems have been adjustedto reflect the current trends in the market.
Remember, our Fallen Angels portfolio is designed for those seeking a potentiallydiversified portfolio with a longer term time frame, and offers both long and shortrecommendations.
Check all our sections daily. See tech, biotech, Fallen Angels, and timing systems forthe latest adjustments. Our ETF trading systems for energy, Spyders, Small Caps, andtechnology have also been updated.
Chart Courtesy of StockCharts.com
Sentiment Summary:
Caution Still Evident
Option traders remained cautious ahead of the weekend.
The CBOE Put/Call ratio checked 0.92. A consistent string of low readings can be a sign ofexcessive optimism and often signals a top in the markets. Readings below 0.5 are ofconcern, but not as serious as readings below 0.40. Readings above 1.0 are bullish. Thenumbers cited here are meant to be evaluated on a closing basis.
The CBOE P/C ratio for indexes checked in at 1.46. Numbers above 2.0 as the market sellsoff, often lead to rallies. Readings below 0.9 suggest too much bullish sentiment, just asreadings above 2 are usually required to mark major bottoms.
The VIX and VXN had readings of 12.59. and 18.23. A fall near or below 20 on VIX and 30-40on VXN is considered negative, a fact that is usually confirmed when the volatilityindexes begin to rise. Readings above 40 and 50, respectively, are often signs that abottom may be close to developing.
The Duarte Overbought-Oversold Gauge (DOOG) rose to 62.5. This remains a neutral reading,and an improvement over last week's 47.5.
NYSE insiders were sellers of stock for the week of 9-8-06. NYSE insider short sales arestill at very low levels. When NYSE specialists raise their short sales, and sell stocks,risk increases dramatically. There is a two week lag for these figures.
Market Vane's Bullish Consensus rose to 70% on on 9-22-06, which is a sell signal.
Market Moves
Marathon Oil Tests Last Ditch Support Level
Marathon Oil (NYSE: MRO) is testing the low end of a long term trading range, as shares ofthe Chicago Mercantile Exchange (NYSE: CME) are tracing a bearish pattern.
Chart Courtesy of StockCharts.com
The commodity stocks continue to send out bearish signals, as some ignore the signs.
Marathon was a leader on the way up for the oil stocks, but lately it has been sinkingfast. The stock has lost 29% of its value since its August top, as of 9-22.
The stock is testing key support near $69, and could fall to the low 50s if that itbreached.
CME has been the bellwether for the commodity rally, and it is also showing signs ofweakness, although nowhere near the trouble of the energy sector.
CME is making lower lows and lower highs, but has support near439, its 200 day movingaverage.
A break below 439 on CME would be a very bearish signal for the long term health of theincreasingly vulnerable commodity sector.
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The Amex Biotech Index (BTK) is still testing the 670 area, but remains one of the weakestsector indexes in the market.
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The Amex Pharmaceuticals Index (DRG) broke out to a new high on 9-1 and has beenconsolidating ever since. 350-355 is the key range.
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The Philadelphia Semiconductor Index (SOX) is still testing the 450 area.
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Small stocks are moving along with the market, but are showing signs of improvement.
