Requiem...

The 200 points rise yesterday turned out to be a bull trap afterall as the Dow dived a grand 390 points on worse than expected unemployment number and crude oil rebounding to new highs. In fact, this is the biggest single day drop since February 2007! With oil nearing $140, there are speculations out there suggesting that oil could hit $160 by July. Seriously, the huge bungee jump in stock market today is due mainly to the surprising rebound in oil. The higher than usual unemployment rate was due to a surge in college graduate labor force that came a month earlier this year than is seasonally adjustable. Therefore, it is not so much a concern. The real concern now is the possible $160 oil. Economists have never imagined oil could go that high as their modelling went only up to $150. The last time the Dow dropped over 400 points back in February of 2007, stocks reversed into a 3 months rally. This time round, a reversal into a rally seemed extremely farfetched. The Dow could pullup a little as value investors pour in next week but it is not likely to result in trend reversal as this reversal into an intermediate bear trend seemed set to go on. Next week is going to be a relatively quiet week, giving investors time to really decide on their outlook and act on it.