Weak NASDAQ Composite Leads Selloff
The Dow Jones Industrial Average opened strong and was up more than 160 points early in the morning, fueled by the news of the possible merger of DuPont and Dow Chemical. Both companies’ stock was up almost 12% today. At around 10:30 the crude oil inventory number was reported as a decrease of 3.1 million barrels. This decrease in the crude oil inventories pushed crude oil up above 38 dollars a barrel. At around 11:30-12:00 we started seeing heavy selling in the market. The S&P futures had traded as high as 2079.75 and then sold off sharply, trading down to a low of 2034.75, erasing the gains and closing in the low-mid-2040 range. The NASDAQ Composite was very weak today. Stocks like FB (Facebook), AMZN (Amazon), and GOOG (Google) were down today. The Dow Jones Industrial Average started the day off strong before following the declines in the NASDAQ Composite.
I stated that once the Dow Jones Industrial Average gets into the 17800-18400 range if I was a long term investor I would look to sell and be 100% in cash going into the New Year. I do believe that we will be in trouble going into the beginning of 2016. There is weakness in Europe. The DAX (German stock index) and the FTSE European Index were down heavily today. I believe that the Dow Jones Industrial Average could possibly retest the lows of 2015 sometime in the second or early third quarter of 2016. If I was a long term investor I would look be in cash and wait for good opportunities to reenter in 2016. With about 15 more business days left in the year, I am still looking for a pushup in the Dow Jones Industrial Average above the 18000 level. I am hoping that this push up provides one more chance to sell in the 17800-18400 range.
Gold got up to the 1085 level again today before selling off sharply, trading down to 1074. It looks like gold is going to be in a range between 1040 and 1090. Gold is dead money here.
Crude oil traded below 37 dollars a barrel at one point today after hitting the high of about 38.14. Crude oil is dead money here. I am waiting for a pattern to setup on the daily chart where I would look to get short, possibly in the 41.50-43 range. When crude oil drops it puts significant pressure on the S&P 500 oil stocks such as CVX (Chevron), HES (Hess), and SLB (Schlumberger). Oil needs to stabilize so that we can get the push back up that I am looking for.