-- Posted Wednesday, 9 July 2008 | Digg This Article | Source: GoldSeek.com
Rick’s Picks
Wednesday, July 9, 2008
“Phenomenally accurate forecasts”
We were looking for a collapse in oil prices to trigger off a big rally on Wall Street, but that’s not what happened yesterday, not exactly. It was more like a delayed reaction, and a muted one at that. When traders arrived at the New York Stock Exchange, crude was already off $4 a barrel, on its way to a $5.33 loss -- the biggest single-day drop in 17 years. How did the Street respond to this economically exhilarating piece of news? Well, buyers and sellers alike dithered for the next four hours, sending the broad averages up, then down, then up again, and then down. It wasn’t until the trading session was nearly two-thirds over that stocks finally took off, sort of. The Dow settled up 152 points on the day, a relatively modest gain, considering investors have been absolutely obsessed with crude oil’s every uptick in recent months.
Perhaps too many traders had anticipated that crude eventually would crack, and now that it quite possibly has, they’re selling the news? Or maybe everyone is worried that quotes are going to come roaring back? Whatever the case, we’re not planning on shorting into any rally the spills over into Wednesday’s opening hour. That’s notwithstanding the fact that we’d all but guaranteed a few days ago that the E-Mini S&Ps were headed for a 50-point plunge (equivalent to around 400 points in the Dow). The futures were two-thirds of the way there at yesterday’s lows, and the bearish target will remain valid unless the S&Ps gain 20 points today. But it would take quite a bit more than that – a 64-pointer, to be precise, or 5% -- to turn the daily chart sufficiently bullish to mitigate our skepticism for even a little while.
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