Oil Sinks But Dow Loses Momentum...

FUNDAMENTAL ANALYSIS
Oil sunk below $130 today to close $124.48 per barrel even though crude inventory fell larger than expected. Shouldn't a drop in crude inventory make crude oil price go up instead? In a normal, fairly traded market based on the fundamentals of economic principles, YES. BUT, was oil traded this high this quickly based on the fundamentals of economic principles? Definitely not. Oil is this high this fast due to speculation by oil traders and hedge funds all over the world. In fact, most of this retreat is due again to the exodus of these funds as authorities all over the world stepped in to investigate possible manipulation (not to mention the fact that oil demand has dropped significantly in the US this past quarter). Not surprisingly, the transport sector led the advance today as airlines rebound on the lower crude oil. The Dow rallied early on the retreat in oil before settling down at +29.88 points. The oil led "rally" so far has not been a broadbased one. Pro oil sectors are down and con oil sectors are up. Such a market action is definitely not one of a healthy bull market recovery and can only be considered speculative.

TECHNICAL ANALYSIS
The Dow ended higher today but produced 2 very negative signs. 1; It failed to breakout strongly today. 2; Momentum indicators are displaying a reduction in bullish momentum. All these happening at the 30MA bearish resistance ceiling shows that the Dow has yet to change its intermediate bear trend. Following up from my analysis yesterday, we did not see the investor conviction that we hope to see today and that investors are certainly still short term pessimistic and requires more evidence and support before taking action.


Dow Technical Chart By Best FREE Charting Software, TC2007! FREE DOWNLOAD!