Oil's Historic Day Sends Dow Spiraling Downward

According to this article on oil and stock marketing trading at Foxbusiness.com, crude oil easily broke the record for the largest one-time gain and the all-time record close when it settled at $138.54 on Friday. That marks a gain of 8.4%, or $10.74.

The previous all-time record close of $133.17 was set on May 21 while the largest one-time gain was set on Thursday when oil surged $5.49.

Crude’s surge was so sharp that trading was temporarily halted Friday afternoon for all oil-related commodities after they hit their daily limit for trading on the New York Mercantile Exchange.

Crude oil peaked at $139.01 a barrel on Friday afternoon, an increase of $11.22 after opening the day at $127.79.

The price jump came as traders buzzed about an analyst predicting oil would hit $150 by next month, a drop in the U.S dollar and a threat of a potential air strike in Iran.

Ole Slorer, a Morgan Stanley analyst, forecasted crude could hit $150 by July 4, due to increasing demand in Asia. This combined with a weakening dollar may have encouraged overseas traders to seek a hedge against the falling dollar.

A day after the European Central Bank made comments that hurt the greenback, the dollar fell further on Friday as a result of weak labor data. The U.S. Department of Labor released a report showing the unemployment rate increased from 5.0% to 5.5% last month, the biggest monthly increase since 1986.

Phil Flynn, FOX Business contributor and energy analyst at Alaron Trading cited the data, the dollar, and geopolitical concerns.

“You put it all together it was a prefect storm to drive these prices,” Flynn said. “Traders down here never saw anything like it and they may never see anything like that again.”

Nigeria's Oil Minister Odein Ajumogobia told Reuters that OPEC is ready to jump in and help to slow rapidly rising oil prices, but it does not see any reason to immediately increase supply. Ajumogobia insists the weak dollar and fear of a supply gap were the driver in today’s spike, according to Reuters

It's Not Just Taxes, It's the Dollar

From an article on income taxes and the economy:

The proper level of taxation has predictably emerged as a major presidential campaign issue. The irony here is that stock market returns since the 1950s show that the dollar's stability and its direction trump taxes as the greatest indicator of our long-term economic prospects.

Sadly, the dollar's fall this decade has not generated any kind of campaign comment from either side. Oddly enough, both Senators McCain and Clinton support a federal gas-tax holiday for the summer. But it should be said that this gimmick perhaps is the primary campaign's ultimate non-sequitur. To endorse an 18-cent-per-gallon tax cut on gasoline is to miss the point. Pump prices aren't high due to federal taxes, but instead are reaching nosebleed levels thanks to a collapsing dollar.

If it's agreed that stock market returns at the very least indicate long-term economic optimism, the dollar's fall should be issue no. 1 for candidates on both sides. Just as high tax rates erode the value of paychecks and investments, so does inflation. And when stock market returns over the last 60 years are considered, it becomes apparent that all three presidential candidates do not have their eyes on the ball. In short, it's the dollar, stupid.

Today's Republicans want tax cuts, while Democrats want tax increases. Judging by equity returns, both sides ignore the dollar at their peril.

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Daytrading Tip: Using Mental Stops

Using Mental Stops

from Daytradersbulletin.com

Many traders prefer mental stops for protection. Some traders feel that by having a stop order resting on the floor, they are vulnerable to a run on their stop, and in many cases, they are correct. If you want to use mental stops, you need to be aware of the amount of slippage that occurs from the time you decide to place an order until you receive your flash fill.

Check the time it takes to place a market order on a number of occasions and average the number. If it takes one minute to get your fill, then see what dollar range the current 1-minute bars are on your chart.

This dollar value will be your probable slippage. I say probable because in some market conditions, price can move very rapidly against your position and with no stop in the market, your trading account could suffer accordingly.

In any event, if the amount of slippage that occurs between the time you decide to make a trade, and the receipt of your flash fill is comfortable for you, then by all means use mental stops. However, if you are subject to interruptions during your trading, or if you are easily distracted, I advise against your using mental stops.