Crude oil and stocks are bound together tightly as the two continue to move in tandem. How long this will last is anyone’s guess, but for now the high correlation continues. The commodity jumped nearly 7% on the day as hope over production cuts lasting continue. Mixed economic data didn’t slow down those who bid the market higher during the morning hours. While there were a few hiccups throughout the session the light volume action remained in the upper half of the day’s range. The lack of volume is not surprising especially on a Monday, but calls into question whether or not institutions are accumulating shares. We will need to see new leadership emerge for this rally to continue to move higher. At the moment leadership is thin.
Energy was the top gainer in the S&P 500 along with Consumer Discretionary and Materials. Consumer staples were the laggards on the session. No surprise energy led today up more than 2.2%. The real question is can it last? If this rally is about more than just a rally in crude oil we will see new leaders emerge. In the chatroom today we were pointing out prior leaders setting up in short patterns and not in a continuation pattern or even in a new base. It puts the odds of this rally failing much higher than if we had new leadership emerging.
Five trading days left in the month of February and we are at least treading water. We still have a high cash position as we are still not finding a lot new long signals. If new shorts do pop-up we will certainly take the signals. There is no need to ignore our process. Keep grinding.
