Two More Strikes
22nd May 2008
Two more strikes against the stock market yesterday. Oil opened higher, and kept on going, rising over 3% to close over $133 per barrel. If that was not enough, the FED released the FOMC minutes from its April 30 meeting. They pretty much confirmed that Uncle Ben is done cutting rates and now is more concerned with inflation. Glad to see he finally stopped at the gas station on the way to the grocery store.
Not surprising that the stock market reacted poorly to this news. It doesn’t look too good from a technical perspective either. We already mentioned that it had been stopped by overhead resistance at the 200 day MA earlier in the week.
Yesterday’s drop blew right through the bullish trend line established after the March lows. And thanks to Tony and Eric for pointing out several indicators showing that pricing momentum is definitely running out of gas.
With two big down days in a row, you should probably wait for a pull back to before taking more aggressive bearish positions or adding some protection on your long positions.
JD
SP 500 May 12, 2008