What To Watch

It was indeed a quiet end to the week on Friday if you were involved in stocks or currencies, with the Dow Jones closing up 28 points on the day and the US dollar relatively flat compared to Thursday. The Dollar did close out the week at a price above 8020, currencies deserve their own post, I will have more on currencies in a post by tomorrow morning. I wanted to write about something that I found very interesting on Friday, and I wanted to get it out there before the markets start trading this week.

I am going to use the Dow Jones when referring to US stocks this week. Here is a daily chart of the Dow, I have drawn the trend lines. The small line at the top represents a minor daily trend that has formed since the highs made after the "strong" US job number on July the 3rd. The bottom diagonal line represents the strong up trend since February. Please see how the strong down days this past week came down to the trend line but bounced to keep the trend in tact. You will actually see a couple of times where the price traded through the trend line but what matters most, is what the market closes at on the day!

I am very curious to see what takes place this week. If prices head higher to start we will most likely see another rally to the upside taking the Dow back above 17000 and the S&P 500 to 2000. However, I am watching to see when and if we break this uptrend line that has kept the bulls live and well since February. If my opinion means anything, I do believe there is a strong chance to break down this week and if the trend line breaks, we will have a ways to fall. We can expect a busy week with earnings set to be reported all week long, let's see how things pan out after the "forgotten" terrible 1st quarter.

The other happening that has got my attention is this steep price drop in Oil. Oil fell more than $2 on Friday and is looking like sub $100 is coming soon. I did speak of Oil last week and I mentioned how it very well could be signaling how strong or weak the US consumer is. Is oil demand slackening with prices over $100? That is the only thing that I can think of and we may look back to this fall in the oil price if the equities are near a top and do indeed fall from here. Here is the chart on Oil, will it find support?

Maybe it will find support off everything going on the Middle East especially Iraq. Please read the article that I am attaching below. If Oil cannot rebound soon and head higher, with all this going on, the economy may not be as good as they tell us!
http://www.bbc.com/news/world-middle-east-28265064

Lastly, I want you to notice Gold. While US equities are near all time record highs this past Friday, Oil and many other commodity markets are falling at a nice clip, take a look at how Gold held near the highs.

Watch all 3 markets closely, we could be in for an interesting or explosive week to say the least!
If trading just remember to be quick and nimble. I'll have another post devoted to currencies by Monday morning.
Thanks
TraderMartin