INCREASED MIDEAST TENSIONS CAUSE SOME PROFIT-TAKING IN STOCKS -- AND HIGHER CRUDE OIL PRICES
ATTACK ON IRAN'S TOP GENERAL PUSHES OIL PRICES HIGHER... Overnight news of the killing of Iran's top general by the U.S. is having a reasonably predictable effect on global markets. Global stocks are experiencing some profit-taking, while money is flowing into traditional safe havens like Treasury bonds and gold. The market most effected by the increase in Mideast tensions is crude oil which traded today at the highest level in eight months.
Chart 1 shows the United States Oil Fund (USO) testing chart resistance near its September peak. A close above that barrier could signal even higher prices. Energy stocks also started the day on a strong note. Chart 2 shows the Energy SPDR (XLE) alsoin the process of testing its September peak, but having trouble holding onto its earlier gains. A decisive close above that chart barrier is needed to signal higher prices. Higher energy prices are weighing heavily on fuel-sensitive airline stocks. The Dow Jones US Defense Index, however, has broken out into record territory.
Sectorwise, most sectors are in the red with financials being hurt by a sharp drop in bond yields. Defensive bond proxies like real estate, utilities, and staples are getting a small boost. Stock prices in general are heading into afternoon trading trying to make back some of their earlier losses. No serious damage has been done to existing uptrends. Short-term overbought readings, however, suggest that some profit-taking was probably due anyway. We'll let things settle down a bit and take a closer look at any potential trend changes in another message.
Market Vision 2020
EarningsBeats.com is sponsoring "Market Vision 2020", an online financial conference slated for tomorrow, Saturday, January 4th. I will be joining Market Vision 2020 as its Keynote Speaker and I'll be sharing my thoughts on the potential improvement in the global economy in 2020. I'll review the implications of stronger foreign stocks this year and the possibility of a weaker dollar. Also why commodity prices may finally have a stronger year. I'll get into all of that and more tomorrow morning. If you'd like to join me and a list of speakers that include many of my colleagues here at StockCharts.com CLICK HERE, simply to register for Market Vision 2020!
