Market Is Still Ignoring Ominous Oil Price Plunge.
Thursday, October 4, 9:25 a.m. In my weekend column I noted how the price of oil is always a pretty good indicator of what is happening to global economies, and therefore stock markets. The further plunge in the price of oil this week did not relieve my concern. The price of oil recovered and rallied [...]

Thursday, October 4, 9:25 a.m.

In my weekend column I noted how the price of oil is always a pretty good indicator of what is happening to global economies, and therefore stock markets.

The further plunge in the price of oil this week did not relieve my concern.

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The price of oil recovered and rallied strongly in 2010 in reaction to QE2, and last year in reaction to ‘operation twist’. That action was identical to the stock market’s actions.

This year oil was down sharply from its March peak to a June low, and then rallied strongly, along with the stock market, apparently on hope the Fed would come to the rescue with QE3.

But this time, oil has now plunged 12.5% in the three weeks since QE3 was announced. But the stock market has not.

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Is it different this time? An important question, since oil has not just tracked with the temporary economic slowdowns and temporary recoveries short-term, as shown in the above chart. It also has tracked with the more serious events like the great recession of 2008-2009.

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And the recession of 2001.

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And the stock market also moved with the price of oil and the economy, not only in the short-term summer corrections and recoveries of the last three years, but also in those longer term events, with the severe 2000-2002, and 2008-2009 bear markets.

And thus it is a legitimate question to ask if it’s different this time that oil has plunged 12.5% over the last three weeks, while the stock market has not.

Gold is at next resistance level.

Our indicators remain on the buy signal for gold. It blew through the first overhead resistance areas we provided, at the 30-week m.a., and then $1,700.

But it’s now at the next potential resistance, at $1,790, the level of its peaks in late 2011 and early this year.

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To read my weekend newspaper column click here: Are Declining Oil Prices Predicting A Stock Market Decline- Sept. 28, 2012.

Subscribers to Street Smart Report: There is an in-depth U.S. Market update (5 pages) from yesterday in your secure area of the Street Smart Report website.

Yesterday in the U.S. Market.

Low volatility, low volume.

The Dow traded in a range of 97 points from its intraday high to its intraday low, with 0.6 billion shares traded on NYSE.

The market hit its high mid-day with the Dow up 54 points, and its low near the close, when it was down 43 points. But selling came in during last half-hour to close it up 12 points for the day.

The Dow closed up 12 points, or 0.1%. The S&P 500 closed up 0.4%. The NYSE Composite closed unchgd. The Nasdaq closed up 0.5%. The Nasdaq 100 closed up 0.7%. The Russell 2000 closed down 0.2%. The DJ Transportation Avg. closed up 1.2%. The DJ Utilities Avg closed up 0.6%.

Gold closed up $4 at $1,779 an ounce.

Oil plunged $3.96 a barrel (4.3%) at $87.93.

The U.S. dollar etf UUP closed up 0.3%.

The U.S. Treasury bond etf TLT closed unchanged.

Yesterday in European Markets.

European markets were mixed yesterday with only fractional moves. The London FTSE closed up 0.3%. The German DAX closed up 0.2%. And France’s CAC closed down 0.2%. Greece closed down 0.4%. Italy closed up 0.2%. Spain closed down 0.5%. Russia closed down 0.6%.

Asian Markets were down Tuesday night but up last night.

The Asia Dow closed down 0.2% Tuesday night, and up 0.6% last night.

China’s market remains closed for the week for holidays.

Among individual markets last night:

Australia closed up 0.3%. Hong Kong closed up 0.1%. India closed up 1.0%. Indonesia closed up 0.5%. Japan closed up 0.9%. Malaysia closed up 0.6%. New Zealand closed down 0.2%. South Korea closed down 0.2%. Singapore closed up 0.3%. Taiwan closed down 0.1%. Thailand closed down 0.1%.

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Markets This Morning:

European markets are mixed with only fractional changes this morning. The London FTSE is down 0.1%. The German DAX is down 0.1%. France’s CAC is up 0.1%

Oil is up $.93 barrel at $89.07

Gold is up $10 an ounce at $1,790.

This Morning in the U.S. Market:

This week will be an important week for potential market-moving economic reports. They include the ISM Mfg Index, Construction Spending, ADP Monthly Jobs Report for September, Factory Orders, minutes of the Fed’s last FOMC meeting, and on Friday the big one, the Labor Department’s Monthly Employment Report for September. To see the full list click here, and look at the left side of the page it takes you to.

Monday’s reports were that the ISM Mfg Index ticked up enough in September to get back above 50, into positive territory, rising to 51.5. But the Commerce Dept. reported that Construction Spending fell in August for the 2nd month, falling by 0.6% compared to the consensus forecast of a 0.5% gain.

Outside of the U.S., the worsening economic slowdown in Europe was confirmed as the Markit PMI Index in the U.K. fell to 48.4 in September from 49.8 in August. Markit’s chief economist said “That could dampen economic growth severely and keep the U.K. economy in recession.” And the Markit PMI for the 17-nation eurozone ticked higher, but only to 46.1 in September, its 14th straight month below the recessionary level of 50. “Output, order books, and exports all continued to fall at steep rates.” Markit’s chief economist said.

There were no reports Tuesday.

Yesterday’s reports were that the ADP monthly employment report showed 162,000 new jobs were created in the private sector in September, compared to the consensus forecast of 153,000. The market didn’t pay any attention to it, perhaps due to the ADP reports sometimes being way off the mark when the Labor Department’s report is released on Friday. (Last month the ADP report was that 173,000 jobs were created in August but the Labor Dept report was only 103,000). Also yesterday it was reported that the ISM non-mfg Index improved to 55.1 in September from 53.7 in August.

This morning report was that new weekly unemployment claims rose by 4,000 to 367,000, while the 4-week m.a. remained unchanged at 375,000.

Still to come are Factory Orders at 10 a.m., and the minutes of the Fed’s last FOMC meeting, which will be released at 2 p.m.

Our Pre-Open Indicators:

Our pre-open indicators are pointing to the Dow being up 40 points or so in the early going.

To read my weekend newspaper column click here: Are Declining Oil Prices Predicting A Stock Market Decline- Sept. 28, 2012.

Subscribers to Street Smart Report: There is an in-depth U.S. Market update (5 pages) from yesterday in your secure area of the Street Smart Report website.

I’ll be back with the next regular blog post on Saturday morning, as usual later than the week-day posts, probably around 11:30 a.m.

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