More importantly, these types of events can cause fundamental disruptions to the stock market as they cause a realignment of trading strategies. Here are some general points to look for.
The US markets have been in a strong rally for some time. The A/D line has been rising and the CMF confirms an inflow of money in the market. But this type of event could be the catalyst for a correction. Yesterday, the SPYs fell to the 20 day EMA. The next logical area of support is the 50 day EMA, which is currently at 128.55, or 2.5% below current price levels. A sell-off that stops at this level would be a baby correction. I've drawn support lines -- most of which occur near round numbers (click for a larger image).
Finally, remember that sell-offs are good things, as they weed out the shaky longs.
3 comments:
You would think oil traders would wait for a genuine sign of supply constrain in the numbers before spiking 10+% but then I remembered this was an almost strictly speculative market.
Anon --
I've got some oil related posts for later today that you might find interesting.
Mideast unrest (and $150 bbl oil) will hang over the market for some time to come.
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