Widespread Fear as Crude Oil Helps Send Stocks into Correction Mode
Posted on May 22, 2008
Filed Under Market Speculator |
Thanks to a parabolic move in Crude Oil, Financials and continued weakness in home builders have pulled the overall market into correction mode. The overwhelming fear is the consumer will not be able to handle Crude Oil at $135 a barrel. Most notably is gasoline consumption, with a gallon of unleaded 87 octane average in the high 3’s and low to mid 4’s how much can they handle? Is this just all fear driven and can the US consumer adjust their habits? Regardless of what I think Financial stocks and homebuilders are destroying the move in the NASDAQ. The NASDAQ has been the index that has seen most of the strength in the past few months. However, we can not ignore the overwhelming pressure coming from the New York Stock Exchange indexes like the Dow Jones Industrial Average and S&P 500. Time to start cutting laggards.
As we may or may not head further south one should be prudent enough to slash laggard stocks from their portfolio. I for one, cut out PWRD whose price and volume action is just atrocious! A once promising stock broke under the pressure of earnings guidance. When a stock moves against you, its time to let it go and protect that well earned capital.
I am not planning on buying anything until I see more strength and a follow through in this market. Crude Oil is the main driver of this market at the moment. As it moves so will sentiment. Short interest remains at all time highs which leads me to believe that we’ll have buying interest on the dips due to covering. When will the big institutions start stepping up and buying this market? Its too hard to predict that, but, again as I have said before we will see that show up in price and volume action.
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