Three Setors to Watch Short Term

Crude dipped below the $90 support level and left investors with plenty of questions relative to the outlook. First the supply data starts a rally in the price of crude back in July. Now those same supply numbers are sending crude prices lower. The supply numbers actually showed another draw-down in supply, but that didn’t matter as the¬†demand worries are back in the sector. Nothing has really changed on the demand side, but the perception of supply¬†versus demand is creating¬†some anxiety¬†when in reality nothing has changed.¬†Whatever the speculation, the bottom line is the commodity is declining¬†prices, and the question is how low do we go from currently? The selling in early trading on Wednesday broke key support levels which triggered more selling¬†throughout the day. Thus, we have to believe a bounce is in store once the nerves calm. The next key level to watch is $87.30 support. If that breaks look out below.

In the same sector the oil services stocks fell in unison with the price of crude oil. OIH broke below the 200 day moving average and support at the $39.60 level. The next level of support is $38.10. Volume was above average on the selling showing increased nervousness from investors. XOP, Oil & Gas Exploration and Production ETF is holding up better and has held above $54.32 support, the trendline and the 200 day moving average. The refiners held up well as the profit from gasoline continue to be robust. Watch for the opportunities in the energy and commodity sector as this plays out short term.

Merger news helped drive telecom higher and the same news helped give back some of the profits in the sector. MetroPCS and T-Mobil are in talks to join forces in the wireless business. On Tuesday the stock jumped nearly 15% on the rumor and today fell 9.8% on the admittance they were in talks. IYZ, iShares Telecom ETF has been moving lower after a big move to the upside over the last four months. This remains a sector on our watch list to own and expand as the story unfolds further relative to the growth. Leap Wireless fell 18% as well on the sentiment from analyst that they would not be an acquisition target based on their current business model.

Sprint bounced back from selling and dropping nearly 20% the last two days. The 6% gain came on the news from the MetroPCS deal. Sprint was along nicely before all the news and speculating started and it is a stock to watch in the sector for more upside. IDT, CCI and AMT all moved higher on Wednesday to show the interest in the sector remains. Both AT&T and Verizon are breaking through to new highs as leaders in the sector. Watch for the trend to the upside to continue going forward.

One sector to watch today is retail. Same-store sales for the month of September are being released before the open. Watch the reaction to the numbers for clues on how investors treat the stocks going forward. XRT, SPDR Retail ETF has pulled back to the breakout point from early September. If the sales numbers are good the bounce is worth trading or adding to positions. If however, the numbers are bad look for more downside pressure to add  to the selling short term. The consumer is the largest share of the economy and good news could go a long way to helping the broad market continue the upward trend. Scanning the sector shows some solid moves in the leaders and the report will show if there is a follow through on the upside.

The biggest challenge for you and I currently is being patient and letting the answers to the current uncertainty unfold. The worries are still in play relative to Europe, budget agreement or fiscal cliff, earnings, China and more. The data from the retail stores, jobless claims, factory orders and the September jobs report are only going to add to the clarity or worries the next two days. Be patient and let the new create the opportunity along with the next catalyst potentially.