• Trend turns neutral on crude oil
• Market rallies off its 50 day average
• Transportation and Utility Averages lag

Oil prices are no longer in a downtrend and I have removed oil from the bull side of our ledger. Oil prices are attempting to move above the psychological $70/brrl mark. A year ago, oil (July ‘07 crude contract) moved from $70/brrl to $81/brrl from June 15 through the first week in August and then dropped to $53/brrl by the 2nd week in January ‘07. As Stephen Leeb shows in his book, The Oil Factor, it is the change verses year ago levels that can cause market sell offs. Between now and the first week of August, oil could rise to $81/brrl and not be above year ago levels; therefore, the critical item to watch is what happens to the price of oil from the second week of August through the end of the year.

The market rallied off its 50 day moving average last week to close near its 52-week highs. The pull back Monday and Tuesday has been minor and has been on light volume.

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Posted by Michael Chapman at 9:37 AM PDT