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The S&P 500 is
doing its best to build on the half-point rally it put together last week. All
in all, there’s no reason to expect stocks to reverse recent weakness and launch
toward previous highs. It’s better to see stock consolidate after the recent
declines, and, perhaps, grind higher.
The S&P 500 is
trying to take back the first resistance level at 1,280 this morning.
I can’t decide if
there’s actual progress being made on the Greek bailout saga, or if investors
are just getting sick of the seemingly endless drama.
One thing we
should keep in mind, however, is that the Greek debt problem is a minor
catalyst. As we discussed yesterday, the stock market has been declining because
of weak economic data and the potential for that to start affecting corporate
profits and valuations.
Everything else is
basically noise, even though it’s sometimes interesting noise.
We’ve talked a lot
about how oil is a near-perfect indicator of investor sentiment. When investors
feel confident that the economic recovery is on track, oil prices rise. Stronger
economic growth necessarily means greater demand for oil and energy.
When investors are
worried that economic growth is failing, they sell oil because of expectations
that demand will fall.
We’ve also
discussed the impact of the weaker U.S. dollar on oil prices. When the dollar
falls in value, it takes more of them to generate an equivalent amount of
purchase power, and that translates directly into higher oil prices, too.
But the value of
the dollar is also tied to growth expectations. When investors become bearish on
growth, they move out of risky assets like stocks and move money into the safe
haven of Treasury bonds. This activity pushes the dollar higher and oil lower.
Of course, we know
that stimulus like QE2 serves the dual purpose of enhancing growth expectations
and weakening the dollar. But for the net result for the dollar and oil prices
is the same.
Yesterday’s
rebound for oil prices was a good indication that we might get some upside for
stock prices today.
In addition to
oil, we should also be watching shares of Apple (Nasdaq:AAPL) as
an important indicator for stocks and the economy.
As a company,
Apple has it all. Phenomenal revenue and profit growth, and a product
development team that seems to churn out one massive hit after another.
From a valuation
perspective, Apple shares are not expensive. The forward P/E is 11. But Apple is
important because it’s an excellent measure of investor sentiment. It’s probably
the most widely held stock in the world. And it’s traded in a neat range between
$320 and $360 for the last 7 months.
So when Apple fell
below $320 yesterday, every financial media outlet sounded the alarm that Apple
was breaking down.
I asked
TradeMaster Daily Stock Alerts‘ Jason Cimpl what
he thought about the "breakdown" in shares of Apple. Jason was not impressed.
"That breakdown
pattern calls for another 20% drop in Apple," he told me. "Not going to happen."
And shares of
Apple are up $8 today, back over that $320 level. Still, Apple (and oil) is
important to watch. If it ever does breakdown from $320, that will be a bad
sign.
Speaking of
TradeMaster Daily Stock Alerts, Jason lead his
members to 9% and 6% gains last week, despite a very volatile week. And this
week, he’s got his members in a trade that’s already up 26%.
Jason is an
exceptional trader, and always seems t know which the market is headed. And he
always controls risks with stop losses and realistic price targets.
If you want to
stay on top of the market’s every move, and generate consistent short-term
profits too, then check out
TradeMaster Daily Stock Alerts.