Oil - Warning Phase

The current stock market is much dependent on the direction of oil prices. Higher oil prices increases the risk of higher inflation which is detrimental for stock market.

Crude oil prices has corrected from a high of $147 to $122 last night. That is a correction of around 17% in 2 weeks.




Looking at USO (US Oil Fund ETF), the price moved from $119 to $98 dollars in its recent down slide. The phase chart is showing warning signs having moved into “Warning” phase since 17 July 08. A similar pattern occurred in early January where the “Warning” phase lasted 11 trading days. The 200 day moving average for USO is at $86 dollars which is 12% below the current price.

STI Update

STI index is still in “Bearish” mode. The index closed at 2847 points, down from 2926 points.



The index fell into “Bearish” phase in the beginning of June and has now stayed in this mode for 32 trading days. The index is now near the low of 2746 established on 22 Jan 08.

The market is still in a down trend and it is not advisable to play the long side of the market.

The previous “Bear” attack lasted 51 days from 9 Jan 08 till 24 Mar 08. Let’s see how long this bear attack will last.

Shanghai Market Update

Shanghai market has corrected more than 50% from its peak of 6124 set in October 16 2007. The index closed at 2669 on Friday.

The index entered “Bearish” phase since 10 March 2008. The bulls tried to bring the index above its 50 day moving average in May but couldn’t gather enough strength to make a breakthrough.

The index is now clearly below its 50 and 200 day moving average.