Weekly Stock Market Analysis (5/6/06)

The Dow and S&P 500 made new 52 week highs this week as there was some weakness in the price of Crude Oil. As we have seen in the past when the price of Crude Oil has dropped this has allowed for the Dow to rally. The most recent correction in the price of Crude Oil started in mid April which has coincided with a rally in the Dow.

In the near term the price of Crude Oil has a key support level at its 50 Day EMA near the 69 level and the question is will it hold support at this level or not in the days ahead. At this time there are two possible scenarios for the price of Crude Oil. If the price of Crude Oil fails to hold support at its 50 Day EMA then it could eventually drop back to its 200 Day EMA near 64 which would likely allow for the Dow to continue higher much like we saw last February when the Crude Oil broke below its 50 Day EMA. Meanwhile the second scenario would be for the price of Crude Oil to hold support at its 50 Day EMA which would then be followed by a rally eventually leading to a new high much like occurred in July of 2005. In this case the Dow topped out in July of 2005 and then came under some selling pressure.

For our complete report including several charts please click on the following link at
http://www.amateur-investor.net/AII_Weekend_AnalysisMay_6_06.htm