OIL BOUNCE FADES -- BUT ENERGY STOCKS END HIGHER -- MATERIALS JUMP ON DUPONT AND DOW CHEMICAL MERGER -- STOCKS END LOWER -- VIX NEARS 20 BARRIER
MARKET RECAP... A morning oil bounce on low inventory faded in afternoon trading and the testing of support continues. Even so, energy stocks held some of their gains. Chevron and Exxon Mobil helped support the Dow. Materials had a strong day on the merger of Dupont and Dow Chemical. The early stock bounce also faded during the afternoon. The Nasdaq was the day's biggest loser on technology selling. No serious chart damage was done, but stocks continue to test underlying support levels. Bonds bounced as stocks sold off. A sharp drop in the dollar did boost some commodities. The first three charts show the three major stock indexes ending the day lower after trading higher this morning. That downside reversal is discouraging. The Dow and SPX are struggling to stay over their moving average lines. The most important point on the charts is the mid-November low. Prices have to stay above that level to maintain the market uptrend.
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Chart 1
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Chart 2
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Chart 3
VIX NEARS TEST OF NOVEMBER HIGH ... Just as stocks may be headed lower for a test of their November lows, the CBOE Volatility (VIX) Index is heading toward its November high. Chart 4 shows the VIX jumping 10% today to end just below the psychological threshold of 20. That's also where it peaked in mid-November. A close above its November intra-day peak at 20.67 would be a short-term negative sign for the stock market.
