Oil and Financial Stocks Push Down 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.

I stated that if the Dow Jones Industrial Average pushes up into the 16,750-17,250 range I would be looking to short the U.S. equity markets and exit any long positions. On February 1st the Dow Jones Industrial Average traded up to a high of 16510.98 but was still almost 250 points away from entering my range. I would no longer be looking to short the U.S. equity markets or exit any long positions if the Dow Jones Industrial Average pushes up into that range as the Dow Jones Industrial Average has moved significantly lower.

I also stated that if the Dow Jones Industrial Average pulls back into the 15,500-16,000 range I would be looking to buy the U.S. equity markets. I would no longer be looking to buy the U.S. equity markets if the Dow Jones Industrial Average pulls back into that range.

On January 20th the S&P 500 futures traded down to a low of 1,804.25 and were 142 points below the 10-bar moving average on the daily chart, an extreme oversold condition. From that extreme oversold condition the S&P futures rallied about 130 points and the Dow Jones Industrial Average rallied over 1,200 points.

Before the U.S. equity markets opened today XOM (Exxon) reported their quarterly earnings, showing a steep decline in earnings and revenue. XOM closed down 1.70 (2.23%) at 74.59 and CVX closed down 4.05 (4.75%) at 81.24. There was weakness in the financial stocks today with GS (Goldman Sachs), DB (Deutsche Bank), MS (Morgan Stanley), BAC (Bank of America), and C (Citigroup) all down about 5%. Crude oil closed down 5.5% today at 29.88, bringing down the oil stocks. The weakness in crude oil, oil stocks, and the financial stocks pushed the U.S. equity markets lower. The Dow Jones Industrial Average closed down 295.64 (1.8%) at 16,153.54, the S&P 500 closed down 36.35 (1.87%) at 1,903.03, the NASDAQ-100 closed down 93.46 (2.18%) at 4,193.10, and the Russell-2000 closed down 23.55 (2.28%) at 1,008.84.

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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.

I stated I would be looking to buy crude oil in the 24-28 range using a 22 stop. I would no longer be looking to buy crude oil in that range.

Crude oil was down 5.5% today, closing at 29.88. Based on the declines we saw today, I believe there is a high probability that crude oil makes a new low. On January 20th crude oil traded down to a low of 27.56. OPEC is not looking to cut crude oil production and in the month of January Russia produced almost 19 million barrels of crude oil each day. Crude oil is very important to Russia’s economy and I do not expect them to cut production anytime soon.

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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 down 80 cents today, closing at 1,127.20. 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.

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Thank you,

Stephen Kalayjian
@stevekalayjian

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