Stocks started the month of March with a positive showing, but the gains muted somewhat muted. While jobless claims ticked lower, separate reports showed an unexpected slowdown in manufacturingactivity and construction spending. Moreover, reports of a pipeline explosion in Iran added to anxiety about rising oil prices.
While we have done research that shows high oil actually bodes well for stocks,Busch research was based on what we would call a “natural” rise in oil. A rise based on reports like the one today are special circumstances and we’re not sure it has the same apparently bullish effects for stocks. What was interesting though, is judging by the action in the VIX, the market doesn’t seem nervous about this reports impact on stocks.
If the market thought a pipeline explosiowatch at caused oil to rise more than it might have on a normal trading day, we would have seen the VIX spike. Instead we saw the VIX sink more than 5%. With all of that said, the market still stayed below yesterday’s highs which keeps the short signal that was generated in tact. The short signal will remain in tact until the market breaks above its previous days high. That means if SPX remains below 1,376 (today’s high) tomorrow then the short signal will be valid going into the weekend.
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