Strike 2 To Oil!!!

FUNDAMENTAL ANALYSIS
A sharp decline in auto sales released by the retail sales numbers yesterday was strike 1 to oil as it definitely suggests a cut back in energy usage by the US consumers. The CPI numbers today, which was better than expected, also suggested that energy consumption has declined significantly as energy inflation remains flat. How is that possible? Supply and Demand! What causes prices to remain stagnant when supply is short? A DROP IN DEMAND! All these data proved that energy conservation is now the theme of the day for US consumers and that a dramatic move down the demand curve should certainly result in lower prices if supply doesn't drop as much as demand does. In fact, oil supply is going to get a huge boost with another 16 million barrel of oil coming from the Saudi in June! That is going to be strike 3 to oil prices. So, what does an increase in supply but a decrease in demand result in according to econs101? It is just a matter of time crude oil come back down as reality sets in. When that happens, investors can be assured of a sustainable rally in the stock market as the economy recovers. All eyes would be on the Empire State Index and Jobless Claim numbers tomorrow for more confirmation of economic recovery (see economic calendar). I cannot predict the future but with the direction these numbers have been going recently, I think chances are more optimistic than pessimistic.

TECHNICAL ANALYSIS
Even though the market sold off slightly in the afternoon, the Dow still managed to close 66.20 points higher today after slightly challenging the 13000 resistance zone intraday. With the Dow now in short term oversold condition due to the recent pullback onto its 30MA support, it is now in a far better position to challenge the 13000 level again. The last time it challenged the 13000 level, the Dow was already in short term overbought condition, which does not give it the kind of strength for breakouts. I remain optimistic as I ensure my portfolio is long delta.