Even after closing more than 10 points off of its high for the day on Thursday, the S&P500 is still on track to finish higher for the 2nd week out of 3. Oil and copper however, have been less fortunate. Both key macro commodities have given up all of their gains for the week and are in danger of closing lower for the 6th week in a row. From a stock perspective though, XOM and FCX are sitting on healthy weekly gains which may suggest that oil and copper are near their bottoms going into next week.
From a momentum perspective, Thursday’s highs in some key stocks should be watched closely. The early morning strength seen in names like PCLN, AAPL, CMG, & CRM seemed to be used as an opportunity to lock in profits after nice rallies recently in those names. The aforementioned all had leadership qualities when the market was uptrending yet their Thursday highs resulted in lower highs on their charts relative to the last couple of weeks. If SPX is going to break 1,334, it will likely coincide with these stocks breaking above their Thursday highs.
While its hard to see many technical positives out there, there’s 3 stocks that moved above their most recent highs on Thursday. Those stocks are BAC, FCX, & BIDU. In BAC and FCX’s case, both stocks lows from this week was actually a higher low relative to their lows from May. While BAC & FCX both closed negative on Thursday, they did so after first breaking above their highs of the last 2 weeks. In BIDU’s case, the stock actually broke to fresh year-to-date lows this week before rallying to move above its late May highs.
On a net-net basis there is a bit of schizophrenia to this market right now. We don’t associate the recent activity with that of a reliable market bottom, but it is certainly a tradable one. The market seems to be taking some time to work out some confusion as it decides if it wants to follow oil lower, or support a market that looks 10% cheaper than it was 2 months ago at a 4 year high of 1,422.
After all, the last time oil was at this level SPX was around 1,150 and yet here it is today 12% above that level. So is this ominous for the market or is it another sign of deviation from recent correlations such as the one we talked about relative to the dollar the other day? Our early gut feeling is that this is actually bullish for the market. However, we still need to see more evidence that the market is not going to be so reactionary to oils weakness, just like we need to see the same thing in regards to the dollars strength.
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