High Crude Oil Prices Failed to Dampen Market Sentiments

The weak US Dollar and high light crude oil prices did not disappoint US stock markets as all three major US indices posted solid gains, among the three indices Nasdaq Composite was the 'head-turner', we will look at Nasdaq and S&P500 Index charts below but let me start with the currency market and commodity market.




US DOLLAR INDEX
Broke Triangle Support







US Dollar was broadly weak across the board except against the Japanese Yen; this is significant because the YEN is widely used currency for 'carry trades' (this explains why the stock markets managed to post strong gains in spite of the weak US Dollar). Technically, US Dollar Index broke the support of its' triangle pattern (perhaps the currency market is starting to price in another FED rate cut two weeks from now).





CRB INDEX
Approaches Key Resistance







The commodity market was supported by the weak US Dollar as investors turn to commodities to hedge a falling US Dollar: coal and light crude oil are at life time high and spot gold broke above its' 50days moving averages (check these individual commodity charts at stockcharts.com $SCP, $WTIC, $GOLD). The commodity index now approaches its' recent peak and seeks to take-out said peak, it may succeed in taking out its' recent peak but technically the commodity market is at over-bought levels hence a potential pull back may be expected. Buy Light Crude Oil and Coal on pull back.




S&P500 INDEX
Confirmed Higher Low

We have a confirmed higher low for S&P500 Index as recent trough was higher than previous 3/28 and 3/31/ troughs (this is bullish, refer to Weekly Cross Markets date 4/13/08); interestingly, i noted yesterday the significant drop in the VIX Index and last night the volatility index gapped down and reading dropped to 20.53 (lowest in 4 months); moreover, it broke down from major support trend line (check $VIX at stockcharts.com), this may indicate the market might push higher for the rest of the week.

S&P500 Index attempts to re-test its' major support turned resistance trend line and the odds favor a successful break above said trend line.

Nasdaq Composite:

Gap Up on Upbeat Earnings

Upbeat earnings in the technology stocks lifted Dow Jones to post triple digits gains, I recalled Mr. Chart Man (Daryl Guppy) recently noted that all eyes were on the financials when Nasdaq Composite could be the leading indicator for S&P500 and Dow Jones Index.

Looking at the Nasdaq Composite daily chart, the size of the gap last night plus the fact that the index traded quite superbly from open to close, the tech sectors may indeed lift Dow Jones to higher grounds. Moreover, the Index could also be forming an inverted head & shoulder reversal area pattern.