Markets began the week with broad gains as oil was higher by more than 6%. Both the Nasdaq and S&P 500 rose by 1.45% and each traded in a narrow range of higher between 1.1 and 1.6% all session long. Gains were broad with all 9 major S&P sectors advancing, with energy and materials acting as standouts rising by almost 3% as none of the other groups rose by more than 2%, declaring their outperformance decisive. Today was the second consecutive strong start to the week (last week was Tuesday with Washington’s birthday) with the Nasdaq gaining 2.3% on 2/16. To look at the starts of the week since the beginning of the year we see why this recent development of commencing the week on a strong note could be a positive. On 1/4 the Nasdaq lost 2.1%, 1/11 down .1%, 1/19 down .3% (was a Tuesday with Martin Luther King Day), 1/25 down 1.6%, 2/1 was UP a scant .1% and 2/8 was down 1.8%. Looking at possibilities that could disrupt recent market euphoria we look into energy, at the XLE. The ETF recorded its first CLOSE above the 50 day SMA since 12/2 and it shrugged off a bearish dark cloud cover candle last Thursday. The fund may run into resistance at the round number and it may be something to keep an eye on as the oil/stock market correlation remains fairly positive. It was impressive how the XLE bounced almost precisely off the 50 figure on the Demark 1/20 short term bottom. Looking left on the weekly chart we see how strong support was at the 60 number the week ending 8/28 and 10/2 which rose 3.5 and 1.5% respectively (week ending 8/2 reversed 12% off intraweek lows). Will that area which was firm support now become resistance and derail this nascent rally? Or will the markets attempt to display their muscle and decouple if the crude complex stalls? To me it looks like OPEC is much more worried now than the shale producers here at home.
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