CRUDE OIL TRIES TO REBOUND OFF AUGUST LOW -- ENERGY STOCKS ALSO REBOUND OFF CHART SUPPORT -- HIGH YIELD BONDS TEST OLD LOWS AS WELL -- TREASURIES SELL OFF -- DOLLAR DROP BOOSTS COMMODITIES -- S&P TRIES TO HOLD CHART SUPPORT
WTIC CRUDE OIL STILL TESTING LONG-TERM SUPPORT... The recent drop in the price of oil has caused energy stocks to drop which, in turn, has caused nervous selling in the rest of the market. That has pushed a number of energy-related assets into tests of important support levels. The monthly bars in Chart 1 show WTIC Crude Oil trying to hold chart support around the $38. Longer term support is seen at its 2009 low near $33. Oil's ability to stabilize may have some bearing on the ability of the stock market to maintain its uptrend. The daily bars in Chart 2 show WTIC crude (plotted through Tuesday) trying to hold support at its August intra-day low ($37.75). That's an important test. Energy shares are in the same situation. A drop in inventories is pushing oil higher today. That's also giving a boost to energy shares.
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Chart 1
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Chart 2
ENERGY ETFS BOUNCE OFF CHART SUPPORT... Chart 3 shows the Energy Sector SPDR (XLE) trying to bounce off chart support along its September/October lows. That's an important test not only for energy shares, but for the market as a whole. A lot of recent stock selling has been tied to the plunge in energy shares. Buying in the energy patch would reduce some of that anxiety and help support the rest of the market. Chart 4 shows the Market Vectors Oil Services ETF (OIH) in a similar situation. Both are trading higher today along with oil.
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Chart 3
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Chart 4
CHEVON AND EXXON MOBIL HELP LEAD DOW HIGHER... The two big energy stocks in the Dow Industrials are helping lead it higher today -- for a change. Chart 5 shows Chevron (CVX) bouncing off potential trendline support extending back to its August bottom. The stock is also trying to reclaim its 50-day average. Its needs to clear its 200-day line, however, to turn its trend back up again. Chart 6 shows Exxon Mobil (XOM) starting to bounce off its 62% Fibonacci retracement line, and potential chart support along its September high. The only Dow stock having a better day is Dupont (DD) which is surging on news of a merger with Dow Chemical (DOW). [A big jump in those two chemical giants is giving the materials sector a big boost today].
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Chart 5
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Chart 6
HIGH YIELDS BONDS ARE ALSO TESTING SUPPORT... The big drop in high yield bonds has been attracting a lot of attention. That's because high yield bonds have, in the past, had a good track record anticipating downtowns in the economy and the stock market. Most of the selling in high yield bonds, however, has been concentrated in the energy sector. Chart 7 shows IBoxx High Yield Corporate Bond iShares (HYG) also testing support at its October low. Today's energy bounce is providing some support there as well. That's another important test.
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Chart 7
BOND PRICES SELL OFF ... The daily bars in Chart 8 show the 20+Year Treasury Bond iShares (TLT) selling off today. That may be due to today's commodity bounce, and a stronger stock market. Stock have been outperforming bond since late August, and continue to do so. Commodities are also getting some help from a falling dollar. Chart 9 shows the PowerShares Dollar Index ETF (UUP) falling sharply today. That's giving a boost to commodities which, in turn, is putting downside pressure on Treasuries. The good news is that it's helping stocks.
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Chart 8
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Chart 9
S&P 500 TRYING TO HOLD SUPPORT... U.S. stocks are rebounding today. And it's coming at a good time. Chart 10 shows the S&P 500 Index bouncing off the lower support line in a potential "triangle" pattern. Its also trying to stay above its 50- and 200-day moving averages. The SPX is in a crucial spot right now. It has to stay above this week's intra-day low to keep its recent uptrend intact. New buying in the energy patch, and commodity stocks in general, would be a big help.
