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MV Weather Report: No Clouds in Sight for Energy Sector


Rain or shine, we review the day's biggest stock stories.

Treasuries were once again the story of the day: This time, the market reacted positively to the 7-year Treasury auction, which included a 2.26 bid to cover, with a high yield of 3.3%.

The market was directionless prior to the release of the results; afterward, the S&P 500 sprinted higher by 1.54%. We're now up slightly for the week, but it's really been pretty static. This could be viewed as positive - many bulls certainly see it that way.

Today on the Buzz and Banter, Professor Cooper gave his take:

"The S&P was repelled by its overhead 50 period on the hourly chart near 900 this morning and is attempting a second conversion here. The resolution of this attempt should determine the direction into the weekend.

"A move over 900 that sticks sets up another attempt at the hourly right shoulder near 915 that rejected the index yesterday.

"See hourly of the last 10 days with 50 period below."

Click to enlarge

The S&P 500 closed today at 906 off a high of 909. This sets up the possible move to 915 that Cooper discussed. This level will be in play tomorrow as mutual fund managers do their end-of-the-month mark-ups.

Today's rally was across the board, but energy was the big winner, which rallied on news that US energy stockpiles were much bigger then analysts expected. A few of the big winners: Transocean (RIG), Cheveron (CVX), Schlumberger (SLB), Hess (HES), and National Oilwell Varco (NOV).

Today on the Buzz and Batner, newest Minyanville Professor James Kostohryz gave his take on crude oil:

"The problem is that inventories are coming down from absurdly high levels. Thus, it will be difficult for oil prices to climb above a $60-$70 range. And given that oil exploration stocks are already generally discounting oil prices well above $80-$90, and natural gas prices 200%-300% above current levels, the valuations of these stocks are hardly compelling.

"However, the trend in the change of fundamentals must be respected. As we have seen with the equity market rally, the marginal deltas of fundamentals are far more important than their absolute levels.

"I think that the rally in oil stocks, and especially oil service stocks, could have legs. Nonetheless, given the overvaluation of stocks the oil sector as a whole, and the overheated prices of crude relative to fundamentals, I prefer to look for greener pastures. If anything, at some point, I will probably be looking for potential shorts amongst companies exposed to natural gas."

Heads up: Before the bell tomorrow, we have GDP, Chicago PMI at 9:45, then Michigan Sentiment at 9:55.

Have a great night, Minyans!!
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