The rally continues
The rally continues today but some profit taking is starting to kick in on the major indices. Ideally we’d like to see a small pullback giving the bulls a chance to reload. As long as the profit taking is contained I think we’ll be ok. The market really seems to be trading off oil right now which has been hit with heavy profit taking after it’s run to almost $150. My concern is that the drop in oil has been so hard and so fast that it could be due for a bounce soon which will most likely drive the indices lower. One thing to keep in mind though is that long term oil prices do not correlate with long term returns in the S&P 500. Oil has been going up since this bull run started in 2002 but it wasn’t until lately that traders have been fixated on it. I suspect if oil gets below $100 it will disappear from the headlines all together. So if you have a longer time frame then you can forget about all this oil madness because there is no meaninful long term correlation between oil and stocks. After all, sustained higher commodity prices are a sign of a strong global economy.
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