Tuesday, June 21, 2005
Stocks are stuck between a rock and a hard place here. A lot of momentum was lost last week during options expiration and so far momentum has not returned. It is important to trade what the market is doing right now, not what we expect the market should be doing. Right now it is not doing much. Scans revealed a fairly ugly picture today. Stocks are getting sold at resistance instead of breaking out and stocks are not rallying off their bases. Of course we know the culprit here. Oil, our old nemesis, is back near $60. We expect oil to provide stocks with some relief as the over extended price of oil pulls back from its highs. Until this happens though, the outcome of any new trades can be fairly predictable. Stocks will get sold at resistance and they will fail to rally off of support. This leaves us with few really good choices. Shorting a market that is not breaking down is a recipe for whipsaw failure and opening new longs will lead to a slow bleeding of precious trading account dollars. We urge patience here. In a day or two oil prices will most likely come under pressure and end of the month window dressing is almost upon us. These two factors will lead to much better set ups than we have after Monday’s weak session.