$80 oil in the not too distant future
The major indexes took a beating all of last week as
things got off to a bit of a rocky start on earnings news for Q2. By
week’s end, however, tensions in the Middle East and increasing oil prices had
taken center stage to put pressure on the equities markets.
The Dow
took the worst of the hits, although a nearly 100 point decline in the NASDAQ
Composite also was pretty significant. This move down in the NASDAQ was
certainly felt across the Tech sector and now leaves the index at the lower end
of its recent range. In fact, based on a 2 year perspective of the NASDAQ, we
are now sitting at some of the lowest levels since around May 2005. It does,
however, appear that the index, and the Tech sector in general, are stretched to
the downside at the moment, so my suspicion is that we’ll see a tech led rebound
at some point. The Dow also finds itself near the lower end of its recent
range.
Moving
forward, I would venture a guess that earnings season and concerns over oil
prices will continue to dominate center stage and the market’s attention. It’s
difficult to say how developments in the Middle East may continue to unfold. If
they continue to escalate however, then it’s very likely that growing unrest
will continue to unnerve world oil markets. If that does turn out to be the
case, then my guess is that we’ll be seeing $80 oil in the not too distant
future.Â
As I’ve
mentioned previously, higher oil prices act as a sort of tax on both businesses
and the consumer. Ever-increasing prices also give the Fed little breathing
room on interest rates, and this in and of itself is enough to push the equities
markets south. We’ll want to keep on our toes this week and see if the market
can find some footing around these current levels. If not, then the next step
down could be a “doozyâ€, for lack of a better term.
Please feel free to email me
with any questions you might have, and have a great trading week!
Chris Curran started his trading career
at the age of 22 with a national brokerage firm. He combines fundamental and
technical analysis to get the big picture on the market. Chris has been trading
for 15 years, starting full time in 1997, and has never had a losing year as a
full-time trader.