Turmoil abroad, $100 oil ripple through E-minis

Good day! This has been a rough week for the stock market. As I headed out for an early, extended weekend, the tide had not yet turned and the bulls were still holding on and making headlines. My last full day for the week was Wednesday before taking the remainder of the week off for the Traders Expo in New York. At that time, we were starting to see some weakness creep in afterhours last Wednesday, but the overall action had not shifted enough to trigger a strong correction on the daily time frame. In fact, although a number of individual stocks did begin to turn, the market still had a decent session on Thursday and once again hit new highs for the year. This changed dramatically over the weekend.

Dow Jones Industrial Average (Figure 1)

There's been a great deal of speculation over the cause for this week's rapid turn around off multi-year highs. The most commonly cited one is the ongoing unrest and uprisings in Arab countries influenced by the recent revolutionary movements in Egypt. This resulted in the near-immediate resignation of Egypt's President Mubarak.

And now it is particularly the uprisings in Libya that have caught the world's attention and oil and energy shares have been the strongest benefactors in this latest bout of international unease.

Oil hit $100 a barrel as a result of news out of Libya that suggested that as much as half of the country's oil production has been disrupted. Although Libya is not a substantial supplier of oil on the world markets, the political uprisings have been so widespread that concern has been raised regarding the stability of the entire region.

Unsurprisingly, gold has also returned to vogue status in recent weeks.

S&P 500 (Figure 2)


The index futures rolled over off highs once trading resume on Sunday evening. A momentum reversal took place in the indices which triggered a break of the lower end of the uptrend from the past several weeks. Although this week's selloff was triggered on a technical setup, the news abroad, coupled with Tuesday's economic data, did not offer the market any relief.

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