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Monday, November 3, 2014

Daily update 11/3

It was a mixed day.  Most indexes tested higher this morning, but failed to stay there.  I want to show SPY tonight instead of SPX.

SPY has a double doji pattern at the highs.  Doji bars show indecision and two of them in a row show equilibrium.   Markets don't like equilibrium so they tend not to stay there long.  Since this is happening at a prior high this is a very important decision point.  A close above today's high should find some follow through.  A close below yesterday's low should find some increased selling pressure.  Lets have a look at the futures chart.

The bars on the futures have narrowed up also indicating equilibrium.  We can also see a couple of higher tails that were met with a bit of selling.  At the moment people seem a bit unwilling to chase the market higher.  This makes logical sense.  Look at what just happened the last couple of weeks.  How can you chase that higher?  Here is a look at what may be the most important thing to happen today.

I have mentioned a few times that Art Cashin claims oil below $80 presents problems for stocks.  I have shown the fracking cost chart that would seem to back that up as a problem for the oil industry.  Friday I wrote " I believe they have the capacity to put a world of hurt on the U.S. fracking industry if they really wanted to.  I don't know if that is their intention or not since they would not publicly announce that.  I can see why they might want to though."

I think Saudi Arabia openly declared war on the U.S. oil industry today.  The break down on WTI crude came after news hit that Saudi raised prices to Asia and Europe and lowered prices to the U.S.  That seems pretty explicit as to what their intentions are doesn't it?  This is certainly going to hurt energy stocks.  It remains to be seen if Art Cashin is right about the broad market or not.  I have seen some people make a case for oil in the 60s.  I have also seen some people make a case that below 73 is a major problem for quite a few energy players.  That certainly seems to be the intention of Saudi Arabia now.

Tomorrow is election day which usually has an upside bias.  I don't know whether the break down in oil which happened in the afternoon will affect that or not.  After people have had time to digest that overnight it could be a negative.  Time to pay attention as the market decides whether this shall be a double top or not.

I have commented a few times about how all these V bottoms are abnormal.  I thought this chart shows that very nicely.  People have been overeager to buy showing no fear whatsoever.  I don't happen to believe that is a good thing for the market in the long run.  That is simply chasing the market and most of the time that turns out to be a bad thing to do. 

This Weekly Market Summary article is packed with interesting tid bits about the current market situation compared with history. 

Don't forget to vote tomorrow.


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