OPEC ANNOUNCEMENT DISAPPOINTS MARKET -- DRUGS ARE UP - CHIPS ARE DOWN
OIL TRADES HIGHER... OPEC announced this morning an increase in oil production of 2 million barrels a day. Although that was the biggest jump in seven years, crude oil has gained 46 cents and is back over $40. That's not what the stock market was hoping for. As a result, all the major averages are trading lower this morning. Chart 1 shows the Oil Service Holders which are experiencing a minor bounce this morning. This has been the weakest part of the energy sector. The OIH is trading under its 50-day average, but above its 200-day. I suspect whichever of those two lines is broken first will tell us a lot about the future direction of energy prices. Although no serious chart damage is being done by this morning's market pullback, some stock indexes (like the Nasdaq) are retesting support near their 50-day averages. As was the case yesterday, semiconductors are the day's weakest group. A bounce in drug stocks is keeping the healthcare sector relatively stable.
Chart 1
INTEL AND TXN LEAD CHIPS LOWER... The chips are falling again today. The Semiconductor Holders are the day's weakest group. Yesterday's heavy downside volume wasn't a good sign. Intel is the biggest stock in the chip ETF and is moving down to retest its 50-day line. The second biggest stock -- Texas Instruments -- is dangerously close to its 2004 low.
Chart 2
Chart 3
Chart 4
PFIZER LEADS DRUGS HIGHER... One of the few pockets of strength today is in the drug stocks. The Pharm Holders are trading up as shown in Chart 5. Pfizer is the biggest stock in the Pharm ETF. Chart 6 shows PFE moving up through its 50-day moving average. That's also helping to stabilize the healthcare group. The market has shown a tendency lately to open lower and close higher. We'll see if that holds true today.
Chart 5
Chart 6
