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Crude Oil Emerges As Commodity Leader -- For Now

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But keep your eye on market-moving crude oil inventories today.

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Technical Relevance

Bonds
put in a key upside reversal Tuesday (gapping lower at the open and then closing near the highs of the session) as the 5-year Treasury auction showed slightly better-than-expected demand for US debt (stay tuned for today's 7-year auction, however).

Stocks gapped higher and then finished lower for the day Tuesday -- a downside reversal in technical terms -- but the volume has been so light that it would be imprudent to draw any major conclusions based on this week's action.

Commodities also finished modestly lower after gapping higher at the open. Crude oil and copper seem to be giving the complex a boost right now even as gold is a drag.

The US Dollar Index was lower overnight Monday and into the early morning hours Tuesday, as it tested support and then rebounded sharply after 10am following the consumer confidence report. The DXY remained positive throughout the afternoon and into Tuesday night.

Market internals: Russell 2000 Small Cap Index

(Figures are rounded)


Critical Market Components:

S&P 500:
near-term resistance for the S&P remains 1139 (convergence of Fibonacci levels) with possible upside to around 1145 in the near term. Short-term support is the breakout point of 1119 with more substantial support coming in at the 75-day moving average of 1082.86.

NASDAQ: 2271.48 on a monthly close is the number to watch for the NASDAQ and the market as far as I'm concerned. Any close Thursday above that forces me to change my cautious stance on the NASDAQ and the market in general. The 61.8% retracement (using the daily extremes) of the October 2007 to March 2009 range comes in just above current levels at 2292.68. Support is down at the recent breakout point at 2212.49.

Dow Jones Industrials: The Dow remains narrowly above its previous weekly closing resistance at 10,507 (now first support); the next resistance is horizontal band at 10,700 to 10,900.

10-Year US Treasury Yield: Initial resistance level remains 3.85% (the lower end of the target range for wave iii of five); support remains at the horizontal line at 3.603% (12/15 close).

Commodity ETF (DBC): DBC remains just below major resistance at 25; minor support exists at 24.18, with more support below that at the 80-day moving average at 23.45.

US Dollar Index (DXY):
Short-term support (previous resistance) of 77.47 held up Tuesday after the DXY spiked lower (below support) in the morning and rebounded sharply in the afternoon for a key upside reversal; short-term resistance (horizontal line created by June's closing low) of 78.44 was touched on 12/22; the intermediate-term target is the 81-83 area.

Semiconductor Index (SOX):
The SOX continued to pull back Tuesday and broke its short-term support at 357; substantial horizontal line support exists at 332.11; the target on the upside for the SOX is 366.52 (Fibonacci projection) with a max upside of 384.28 (bottom of first wave lower from 7/21/2006).

Bank Index (BKX): Nothing different here -- the BKX remains stuck in the same range; critical support exists at 41.62; staunch resistance at 44.82.

Crude Oil:
Crude has taken over as the commodity leader for the time being (watch for market-moving crude oil inventories today at 10:30 a.m., though); short-term support remains 78.35; $80 appears to be the next resistance area.

Gold:
Gold failed to re-take its broken uptrend line resistance at 1115 and has now started to move lower to possibly test my target of 1045 (the 50% retracement of the recent wave iii of three up move); the next resistance above 1115 is at 1142.90 (horizontal line at 12/17 high).
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No positions in stocks mentioned.

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