Oil Rallies As Suspected – Markets Hunt for Direction

The markets staged another minor leg up on Friday, and as suspected the rally was helped fueled by oil’s sharp reversal on the day. All good there for the time being for those of you who might have gotten long one of the bullish leveraged oil ETF’s. All you need now is some follow through.

At this point, if you did decide to get long oil it’s probably a good idea to set your SSL at your entry and let things play out from there. Assuming the price of crude can continue to build on Friday’s sharp reversal, we could be looking at higher levels ahead. However, we’ll need to hold Friday’s low or we’re likely headed for $37 level we referenced on Friday. Just be sure to play some defense there in the event Friday’s reversal turns out to be an ugly head fake.

The NASDAQ didn’t disappoint either, bouncing nicely off its 3X3 DMA (blue line) in this daily chart below. So far, it appears all systems go to the upside but we’ll need the S&P 500 to break above 2,400 in convincing fashion if the markets are going to suggest higher levels ahead.

As you can see in the daily chart of the S&P 500 here, we’re still hovering right around the high end of its range, so without assuming what appears to be the obvious breakout looming, the index will need to find more strength. It doesn’t necessarily need to happen today, but it’s going to need to happen fairly soon if the markets are going to avoid more range bound activity.