Skip to main content

Oil jumps while the stock market slides down the drain

What a week! Can you spell O-I-L?

Things started out OK. We had another series of economic reports that came in slightly better than consensus estimates. Unfortunately, every week ends with Friday and this Friday was not kind to investors. The May employment report hit and payrolls showed another modest decline though not as bad as expected. The headline unemployment rate, however, jumped from 5.0% to 5.5%, the largest jump in years. Analysts felt that this was explained by an influx of college and high school students just hitting the job market rather than a large decrease in unemployment. Nevertheless, it set a negative tone in trading for the day.

The other bomb that dropped on Friday was the total craziness in the oil market. Crude prices jumped $10 and triggered circuit breakers. The climb in prices resumed, however, and oil ended the day up 8.4%, setting a new all-time record at $138.45. The higher oil climbed, the further the stock market plunged. Aggravating the situation was the dollar, which fell in value and ended the week down 0.6%.

An overview of the short-term technical picture is presented in the following chart of market statistics collected by our Alert HQ process. Each weekend we scan over 7200 stocks and ETFs looking for BUY and SELL signals. We also collect various technical information that we roll up into a chart like the one below:

Stock Market Statistics, week ending 6-6-2008
We plot six different indicators. After this past week's market action, to say we have mixed results would be an exercise in extreme optimism. Most of our indicators are moving in a direction that indicates a market that is breaking down.

Moving average analysis --

We see bad news across the board in the moving averages. The number of stocks trading above their 20-day and 50-day moving averages has fallen again, much as it did two weeks ago. We have to go back to April 11 to see numbers this bad with less than half of stocks below their 20-day MA.

The number of stocks whose 20-day moving average is above their 50-day moving average has finally started to decline also. We see in the chart above that this indicator flattened out last week with just over 60% of stocks in this bullish configuration. Now, we see this formerly solid advancing indicator taking a bearish turn downward.

Looking at buying and selling pressure --

This week we see only a small divergence in signals from Aroon and Chaikin Money Flow analysis.

The Aroon analysis we do shows stocks in strong up-trends or down-trends. The chart shows the number of stocks found to be in strong up-trends dropped for two weeks and but actually increased a tiny bit last week. The number of stocks determined to be in a strong down-trend, however, has now increased for three weeks in a row, reaching 1850 this week. It is still no where near the level we saw back in early March but the percentage of stocks exhibiting a strong bearish trend has now reached 25%.

We also plot the results of Chaikin Money Flow analysis. The number of stocks undergoing strong accumulation or buying made a nice rebound last week and managed to hold steady this week. Not shown on the chart is the number of stocks shown to be undergoing strong distribution or selling. This indicator stopped increasing two weeks ago, declining very slightly to about 600 last week and declined again this week to just under 580.

Compare to the S&P 500 --

Below we show the daily chart of the SPDR S&P 500 ETF (SPY). You can see the some of the recent peaks in SPY correspond to the recent peaks in the number of stocks trading above their 20-day moving averages.

A more ominous feature of the chart of SPY is the problem with the moving averages. SPY is one of those who are now trading below their 20-day, 50-day and 200-day moving averages. SPY has made two attempts to cross over the important 200-day moving average. It did manage to close above it for a few days but has now fallen well back.

This problem crossing above the 200-day moving average is something many stocks and the major indices seem to be having a great deal of trouble doing.

Conclusion --

I have been expecting the market to move sideways before moving upward but the indicators presented in this post tend toward the pessimistic. If trends can be expected to continue, then the latest trends seem to be moving in the wrong direction. Looking at the chart of SPY, for example, there aren't many levels of support left before we are back at the levels last seen in January and March.

Despite the negative outlook provided by the technical indicators we have discussed above, the economic reports we have received lately still leave some doubt as to whether we are in the midst of a real recession. Our work today is not to provide a prediction but to provide information that may perhaps help you come to your own conclusion.


Popular posts from this blog

Running TradeRadar on Windows 7 and Windows 8

Development of the original TradeRadar Stock Inspector software was begun back in the days before Windows 7 and Windows 8 were available.

As these newer versions of Windows have become more popular, we have heard from some users that they are having problems installing and running TradeRadar on their newer PCs.

The good news is that TradeRadar will work just fine on Windows 7 and Windows 8. All you have to do is adjust the Windows Compatibility Settings to ensure TradeRadar runs as intended.

It is recommended that you can apply Compatibility Settings when running the initial installation; however, it is also possible to apply Compatibility Settings after the program has been installed.

Prior to installation
After downloading the install program, go to the folder where you have stored the TradeRadarStkInsp_7_Setup.exe or TradeRadarStkInsp_7_PRO_Setup.exe executable. Right-click on the executable file and select Properties. Click the Compatibility tab. Adjust the Compatibility mode to …

Alert HQ has moved!

End of an era!

This site was started way back in 2006/2007 to showcase my blog posts and the Alert HQ buy signals and sell signals. Alert HQ grew to include other kinds of stock alerts including Swing Signals, Trend Busters, Trend Leaders, Cash Flow Kings and more.

In the meantime, I built a sister site, and I started using some of the same Alert HQ content over there. As a result, I am discontinuing the Alert HQ data here at

The good news, however, is that all the Alert HQ signals and stock screens are still completely free. In addition, the pages have been enhanced so that you can hover over a stock symbol and a small chart will pop up so you can get a quick look at the stock's recent price action. If you click on a symbol it will take you to a page with plenty of financial and technical analysis information (still free!) as well as a larger chart that you can play with in terms of adding or deleting indicators, moving averages, etc.

Click …

Durable Goods report for Sept just so-so but Computer segment is on fire

The Durable Goods advanced report for September 2011 was released on Wednesday.

I like to dig into the Durable Goods report because it can be useful for seeing how tech in aggregate is performing and how the sector may perform in the future. I always focus on two particular measures: shipments and new orders. Let's see how it played out last month.

Shipments -- 

I generally give less importance to Shipments since this is a backward looking measure reflecting orders that have been confirmed, manufactured and shipped. It's similar to earnings reports -- it's good to know but the data is in the past and we're more interested in the future. The following chart shows how September shipments looked for the overall tech sector:

Results for the overall tech sector were a bit weak but take a look at the next chart which tracks the Computers and related products segment:

Results here were actually quite good and, to make things even better, the previous month was revised upward.