Traders often use intermarket analysis to gain perspective on various correlated markets, and MoneyShow’s Tom Aspray shows how he watches crude oil to glean clues on the stock market’s future direction, as well as providing some specific levels to watch.
Even though the US market opened lower Thursday in line with weak European markets, once again stocks battled back as the S&P 500 closed slightly higher on the day. The market internals were flat for the day but the A/D lines are still in clear uptrends.
The stock market’s ability to absorb the recent selling is a positive sign but the market needs to accelerate to the upside to stop out the remaining market bears. The daily volume analysis on the Spyder Trust (SPY), as well as the S&P futures is still positive and does not show any signs of a market top.
Crude oil is a market I watch closely for hints of a turn in the stock market as it will often top out or bottom out ahead of stocks. Many times crude oil will break through support or resistance days, or even weeks, ahead of the Spyder Trust (SPY).
A review of the crude oil market and two leading energy ETFs can identify the key levels that if overcome may signal the next significant move in the stock market.
Chart Analysis: The weekly chart of the crude oil futures shows the high in early March 2012 above $115 and the subsequent drop to a low of $80 in June.
The daily chart of the April crude oil contract reveals that on September 19, 2012, it dropped below its support at line c. Over the next four weeks crude developed a broad trading range as the Spyder Trust (SPY) completed its top.
NEXT PAGE: Positive Signs for Energy Sector