The Market Stands At A Frontier
“OPEC said to Agree on First Oil Output Cut in Eight Years” Bloomberg.
Not exactly as old as this vintage gas pump, a united OPEC does appear as an anachronism.
Said to agree as in we agree to agree but what exactly do we agree to? That’s the cynical side of my analysis.
Nevertheless, a deal reportedly has been reached for November. “Sources” say OPEC will limit output to 32.5 million barrels per day.
The objective side of me and the one that has written to you every day this week about the relationship among oil, solar and the overall market indices can’t help but take notice of the auspicious timing.
The theory I put forth since Sunday supported the notion that if oil and sustainable stocks rallied, that could be the catalyst for more market rally.
So now that oil might really finally take out a key weekly moving average, will the market indices continue their tear higher?
No shortage of news today, we also heard from Mario Draghi and Janet Yellen. Besides reason to be fearful number one possibly off the table-deflation, reason to be fearful number two-the future of monetary policy-also headlined.
Draghi’s looking for at least a 2% inflation rate before making any change to monetary policy.
Then there’s reason to be fearful number three-big bank failures. Yellen focused on the big banks by stating that the Fed has initiated a stress review.
However, one member of the Modern Family, our Prodigal Son Regional Banks, danced for joy. Yellen will consider making small community banks exempt from restricting investment and compensation limits.
On the question of the overall market, assuming the oil deal goes through which in turn will help the recent solar rally from failing, what’s next?
If Regional Banks (KRE) continue higher from here, that’s a feather in the Modern Family’s cap. We need more feathers. Grandma Retail (XRT) sits excruciatingly close to a breakdown. Biotechnology (IBB) could not clear the resistance at 298. Transportation (IYT) is a sort of a half feather in the cap. Semiconductors (SMH) has been the hat of the Family let alone a feather!
And the Russell 2000 continues to use diplomacy. Stronger than his wife, weaker than his daughter and happier his Prodigal Son may come back to life.
Rarin’ to go? Once Granny resurrects from the Frontier, I think yes!
“Doubt begins only at the last frontiers of what is possible”. Ambrose Bierce
S&P 500 (SPY) Better if can clear over 217 and hold 215
Russell 2000 (IWM) Through 124.75 area better still
Dow (DIA) 184 is the overhead 50 DMA to clear
Nasdaq (QQQ) 119 next hurdle to close above
KRE (Regional Banks) Given Yellen’s statements, this has potential.
SMH (Semiconductors) 67 support
IYT (Transportation) 144-146 the resistance to clear.
IBB (Biotechnology) Needs to clear 298 to see 300 and beyond.
XRT (Retail) Last frontier right here-needs to hold today’s lows and make a move
IYR (Real Estate) Held support
ITB (US Home Construction) Needs to clear 28.00
GLD (Gold Trust) I suggest the bears look at a monthly chart
SLV (Silver) A weekly bull flag forming taking its time to break out of
GDX (Gold Miners) 26.50 pivotal support
USO (US Oil Fund) Still waiting on the weekly chart to bust out
OIH (Oil Services) I’d call today’s action a reversal
XLE (Energy) Ditto here
XOP (Oil and Gas Exploration) And here
TAN (Guggenheim Solar Energy) I like the rounding double bottom potential. Needs confirmation
TLT (iShares 20+ Year Treasuries) 138.30 the 50 DMA pivotal
UUP (Dollar Bull) Until it closes over 25 or under 24.60 I’m neutral
Disclosure: None.