Oil Up, the Market is Up

The semiconductor sector broke through its trading range into a higher high yesterday. Meanwhile energy is still heating up and taking gas and oil stocks higher. The broader market is overbought and risk is high at this stage but it’s awfully difficult to argue with progress. Breadth in the broader market was strong yesterday and volume on the rally was strong so we don’t think anyone can argue that this was a retail rally in which smart money did not participate. At this stage we will have to assume the uncomfortable position that we just don’t know what will occur next. If the semiconductor breakout was the real thing, there will still be time to get in tomorrow or the next day. Likewise, it will pull along trailing sectors which will start to build good breakout patterns as more money comes into the market. If the high price of oil scares the market back into “reality,” whatever that is, then waiting for confirmation will pay off to since less risk exposure will be assumed waiting on the sidelines.