Stocks did nothing yesterday, with the S&P 500 dropping around 20 bps. It almost felt like a pause before the storm type of day. These pause days have tight trading ranges, like those on July 22, 25, and 26, or May 13, 16, and 17. Just a flattish day in between two days with significant movements.
But when we look closer, there is more because all we did was sit by the gap created on August 10. That served as support all day. My guess is that level won’t hold for much longer, and the next leg lower results in the S&P 500 dropping to around 4,070. Pay attention; gaps acting as a support level were a theme yesterday.
Oil
Oil was higher yesterday, as it appears to have risen out of a falling wedge, a bullish reversal pattern. If oil has broken out and is heading back over $100, that will be a massive problem for headline inflation, maybe not for the August reading, but it could really complicate things for September.
Gasoline
The only good news is that gasoline prices haven’t broken out yet. If oil begins to rise, it is hard for me to imagine gasoline prices not rising.
Exxon
Of course, this will get a stock like Exxon (NYSE:XOM) to move higher, and there is a gap at $100 just waiting to be filled. Not that it is very far away.
Amazon
Amazon (NASDAQ:AMZN) finished up just a bit yesterday, but I think it is pretty apparent from the chart the potential trouble the stock may be in as it sits just above support at $132.
Micron
Micron (NASDAQ:MU) is similar to Amazon in a way. The shares are just sitting around support at $58, and if it breaks lower, I think there is a drop back to the low $50s.
