Stock Market Analysis

Tuesday, September 02, 2008

Oil Collaspses!

Oil industry was hit today by a sudden rouge wave that caused widespread collateral damage in the stock market.

Hurricane Gustav isn't going to damage oil supply afterall, taking the support right off the bottom of oil price as it ducks for the $100 mark. What started out as a pretty optimistic session quickly succumbed to selling pressure in the basic material and energy sector, which led the losses in the stock market today. Yes, even though lower oil prices are supposed to be good for the stock market, a sudden drop could so adversely affect the energy and basic materials sector that the rest of the market could be brought down with them. That was what happened today.

ISM number turned in inline with expectations and slightly below the 50 mark today but that was certainly not what investors are looking at. If oil continues to fall at a moderate pace from tomorrow onwards, the stock market could find a reason for a bullish breakout. Yes, on the technical front, the Dow is STILL in its short term neutral trend, looking for a breakout.

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