The market ended Friday with its lowest closing price since the November lows. The banks and retail stocks are preventing the major indices from being pulled higher by the now outperforming technology and resurgent commodity sectors. Most interesting is the rise in oil service companies. The price of oil has remained near its lows from the past few weeks, but names like NOV are beginning to form bullish patterns.
Perhaps the oil stocks are foreshadowing a rise in oil prices in the near future. So much supply has been taken offline that if demand ever comes back (a huge if) that there may be a supply shortage. This could cause a sizable spike in crude prices. Other commodity names are beginning to trade higher as well. FCX, RIO and the agriculture names are also performing well.
But the DOW and S&P 500 will not trade higher until WFC, JPM and some of the other presumed “good banks” stop acting like next C and BAC. I still maintain the next leg down will be lower as the market breaks through the November lows. Watch for the technology names and commodity stocks to follow the rest of the market lower. Their strength is the only thing preventing another swift move to the downside.
