Oil Sours the Market

Oil (as judged by the USO) continues to trade in a range from 107.50ish (which it bounced off this morning) to 112.50. It still seems to be a good bet to buy the low and sell high (range trade). Strength in oil has influenced stock prices heavily lately and that relationship does not seem to be letting up. The broad market still looks very tired and the trend is still down.

On the other hand, financials did not push lower after they gapped down and actually ended higher than their open. Morgan Stanley reported and ended up on the day. Goldman was up as well. I think it is a positive that they were not absolutely crushed.

Going forward, its important to observe these two elements of the markets as they basically encapsulate the themes participants are concerned with: inflation and the health of the financial system. I've also listed some other stocks/etfs I'd keep an eye on.

Watch List:
USO - oil continues to dictate market action with strength leading to weakness and vice versa
XLF - weak financials also for-tell broad market action. Concerns over the financial system colors market sentiment, weighs on indices, and influences fed policy (dollar, interest rates as well).
BUD - Buffet will likely be on board. Shareholders are tired of lackluster stock performance. A dip at this point looks like a gift.
SHY - fed talks tough but action is another thing. The bond market is pricing in 2.75% at the end of the year, but will have to adjust its expectations and short term rates once reality sinks in. See Robert Novak's article from the Washington Post and Catherine Baum's on Bloomberg
ESLR - waiting for a spike to 12 to short. It has not made it much above that level on several recent tries.
DGLY - great story stock, undiscovered by the street, support at 8.50
BIIB - Carl Icahn pushed to get this stock sold. It actually got an offer for around 82 bucks a share (its trading at 58.50). It has behaved well in this market and is nearing support at 55 where I have recommended it before.

Speaking of Carl Icahn, he is finally going to start blogging!!!! According to Reuters, Carl will become an active blogger on his site http://icahnreport.com tomorrow. I'm planning on becoming an avid reader.