9% Upward Move in Crude Oil Propels U.S. Equity Markets

U.S. Equity Markets

I am currently on the sidelines in the U.S. equity markets. I have a sell signal on the weekly charts in the U.S. equity markets. I am looking for the U.S. equity markets to push down and get to a significant oversold condition.

At 9:30 today when the U.S. equity markets opened we saw heavy selling in the financial and energy sectors. At 10:30 the EIA Petroleum Status Report was released, showing a significant rise in crude oil and gasoline inventories from the prior week. This led to more selling in the U.S. equity markets. The Dow Jones Industrial Average was down over 190 points at one point, trading down to the low of 15,960.45. The S&P 500 futures traded down to a low of 1,865. At around 11:00am crude oil exploded to the upside with a huge short covering rally and the rumors that Venezuela is asking for an emergency meeting to cut crude oil production. Crude oil continued to push up through the afternoon, closing up over 9% on the day. This significant move in crude oil helped push up the U.S. equity markets. At 2:00 I got a huge buy signal on the U.S. equity markets propelling the S&P 500 futures up 30 handles. After being down over 190 points at one point the Dow Jones Industrial Average closed up 183.12 (1.13%) at 16,336.66. The S&P 500 closed up 9.50 (0.50%) at 1,912.53, the NASDAQ-100 closed down 21.13 (0.50%) at 4,171.97, and the Russell-2000 closed up 1.46 (0.14%) at 1,010.30.

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Crude Oil

I am on the sidelines in crude oil. I am looking for crude oil to push down and get to a significant oversold condition. If crude oil gets this significant push down I believe there is a strong chance it will bring OPEC to cut production, pushing crude oil prices back up.
Crude oil was up 2.87 (9.61%) today, closing at 32.75. There was a rumor that Venezuela is asking for an emergency meeting to cut crude oil production. Venezuela is not a member of OPEC. It would be more significant if members of OPEC were calling for an emergency meeting. This rumor along with the huge short covering rally pushed up crude oil and the U.S. equity markets. I still believe there is a chance that crude oil makes a new low if there is no meeting in which a production cut is agreed upon. Russia is still producing 19 million barrels of crude oil each day and it does not seem like they are looking to cut production. After being downgraded this morning XOM (Exxon) was up 3.89 (5.22%), closing at 78.48. CVX (Chevron) was up 3.38 (4.16%), closing at 84.62.

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Gold

I am on the sidelines in gold, waiting for a pattern to set up on the daily chart.

Gold was up 15.80 (1.40%) today, closing at 1,143.0. If gold closes above 1,131.30 this Friday I will get a buy signal on the weekly chart. If I get this buy signal I will then have a buy signal on both the daily and weekly charts for gold and the next pullback should provide a great buying opportunity. On this pullback I will also be looking at names such as NEM (Newmont Mining), ABX (Barrick Gold), GLD (Gold ETF), and GDX (Gold Miners ETF).

In the week of December 5th, gold traded down to a low of 1046.60, holding above the big 1040 number. After the Federal Reserve raised interest rates in December gold started to catch a bid. As I have been stating, with the way gold is acting the gold bugs are telling us that there is no way the Federal Reserve will raise interest rates in the first or second quarter of 2016.

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Thank you,

Stephen Kalayjian
@stevekalayjian

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