Intraday Review: Stocks Soar on Drop in Oil

This day, market were excited after Light sweet crude fell $4.14 to settle at $134.60 a barrel on the New York Mercantile Exchange, compounding a drop of $6.44 on Tuesday.
In addition to sinking oil prices, investors found relief in a decision by Wells Fargo & Co. to boost its dividend that helped counter some of the market's concerns about the health of banks.

Investors exited government bonds and back into stocks as it appeared that the slowing economy will curtail demand for fuel and, in turn, energy costs. The Dow Jones industrial average rose 276 points, or 2.5 percent, posting its best daily gain since April. The broader Standard & Poor's 500 index also gained 2.5 percent, while the technology-dominated Nasdaq composite index surged 3.1 percent.

Let's look the Dow intraday chart below:


According to Mark Hulbert's Theory, if the intraday chart direction is nearly forming an upward or downward straight line, further it will be followed by an opposite trend in the next. I drew up an interpolation linear overlays the chart that is shown by a blue line. Accordingly, I expect tomorrow the market will be drop.

Additionally, light sweet crude oil future also signs a potential rebound. It touched the support trend line around $138.



Please Note!

This is generally never true. Before buying or selling any asset you should do your own research and reach your own conclusion. See my Disclaimer on the bottom for more information.

You are welcome to republish this article, or any portion thereof.
Please, cite the actual/original source. I would be grateful if you could link back.

A Big Decline in Oil Causes the Market Rebound

Regarding to Seeking Alpha Editor’s Eli Hoffmann Crude oil futures closed down more than $6/barrel, the largest daily drop in 17 years. Besides longs booking profits, other factors might have been

1. Bernanke saying the U.S. economy faces significant growth risks.
2. OPEC lowered its global oil-demand growth forecast for 2008 by 70K b/d
3. And for 2009 by 100K b/d.

"It looks like oil fell to lows we saw at the end of last week and then probably triggered quite a few automatic sell-stops," Wachovia's Nathan Golz said. Today brings the weekly EIA petroleum inventories at 10:35. Forecast (Reuters): Crude -2.1M. Distillate +2M. Gasoline -0.4M. Utilization 89.2%.

Bespoke Investment wrote that the energy sector is now trading well below the bottom of its trading range, and only 5% of the stocks in it are trading above their 50-day moving averages.


So where has the rotation occurred? Healthcare. As shown, 46% of the stocks in the Healthcare sector are now above their 50-days, and the number is increasing. Unfortunately, the Energy sector now makes up a much larger slice of the market than it used to, so it might be wishful thinking for those who think a big decline in oil will cause the market to go up.


Now, let’s look at the table below. It shows amongst the oil stocks’ annualized reward to capital return.

	Annualized Return	Annualized Volatility	Reward-to- Risk Ratio	Capital Commitment
Exxon Mobil (XOM)	2.5%	26.7%	0.09	$8,482
Unhedged Valero (VLO)	-49.9%	39.5%	-1.26	$7,427
Hedged Valero (VLO+USO)	63.2%	35.9%	1.76	$6,390
United States Oil Fund (USO)	112.7%	30.9%	3.67	$5,353

Hedged Valero position combines a cash account purchase of 50 VLO shares with a margin account purchase of 100 USO shares, meeting the 50% equity requirement with cash. The return depicted reflects the resulting margin loan carried at 1.25% below prime; all other positions depicted reflect cash account purchases of 100 shares. (Source: HardAssetsInvestor.com)

Oil Index at CBOE, today, shows that in order to technical analysis oil has broken the lower band of Bollinger band. When the oil prices index is currently under the lower band, it should be considered oversold as same as W%R signed. Accordingly I expect oil prices will immediately rebound from present lows.


But I do not recommend Valero Energy (VLO) because Refining sector has been shrinking in margin and stagnant. Let’s look at the chart below. It shows even oil prices spike since mid-last year but refining margin traverses in opposite direction of oil prices.


Which one should be bought? XOM is signing that the stock is oversold, let’s look the chart below:


Related Posts :

Exxon Mobile(XOM) is Under Correction

Please Note!

This is generally never true. Before buying or selling any asset you should do your own research and reach your own conclusion. See my Disclaimer on the bottom for more information.

You are welcome to republish this article, or any portion thereof.
Please, cite the actual/original source. I would be grateful if you could link back.

Microsoft (MSFT) Shares are "Attractive Short Term" Heading into Earnings

I republish apart of Eric Savitz's Article from Barron's Online, here is:

Donovan Gow, an analyst at American Technology Research, this morning asserted that the stock offers “an excellent buying opportunity.” He expects June quarter results to be in-line to slightly higher versus guidance, with no change in June 2009 full year guidance of revenue of $66.9 billion to $68 billion with profits of $2.13-$2.19 a share. Gow contends the key metric will be growth in the Windows business, which he thinks will rebound from the weak March quarter. He also expects strength in the entertainment and devices division and from servers. “The stock is heavily undervalued on overly bearish sentiment” on Windows growth and the Yahoo situation, he says, “while fundamentals remain strong.” He maintains a Buy rating and $38 price target.

Oppenheimer’s Brad Reback wrote yesterday that MSFT shares are “attractive short term” heading into earnings. “While we believe some long-term issues remain, we expect the company to post at least in-line results and reiterate its FY ‘09 outlook.” Given the stock’s discount versus both the S&P 500 and its large-cap peers, he says “we would be buyers of its shares ahead of its Q4 results.” He notes that the stock trades at just his 11x calendar 2009 estimate of $2.32, below the S&P at 12.5x, and large-cap software at 14x.

Charles DiBona, an analyst with Bernstein Research, thinks the company’s fourth quarter results and the forward guidance will provide the starting point for a revival in the stock’s reputation. He expects the Client division - i.e., Windows - to accelerate from the weaker-than-forecast March quarter. He sees 10.6% year over year growth in Client revenue in the quarter, with 16.7% for the Microsoft Business Division, which includes Office, 18.2% growth in server and tools revenue, 30.9% growth in entertainment and devices and 38.8% growth in online services. He expects no change in the company’s ‘09 guidance. “Overall, we continue to believe that MSFT’s share price undervalues the true growth potential of the company and view this as one of the most compelling long-term investment opportunities in our coverage,” he writes.

MSFT today is up 94 cents, or 3.7%, to $26.09.


Please Note!

This is generally never true. Before buying or selling any asset you should do your own research and reach your own conclusion. See my Disclaimer on the bottom for more information.

You are welcome to republish this article, or any portion thereof.
Please, cite the actual/original source. I would be grateful if you could link back.