Investors Remain on the Offensive

Despite more chaos in the Middle East and tightening by Chinas central bank, on
Friday, stocks made new two-and-a-half year highs for the third consecutive
week. And even with more oil-rich nations forcing changes in their governments,
which could reduce the flow of oil from the Middle East, the market took the
news in stride and continued to add to its gains. Daily Stock Market News Dow:
+73 points at 12,391.25 S&P 500: +3 points at 1,343 Nasdaq: +2 points at 2,834
Futures and Related ETFs March Crude Oil: +78 cents at $87.14 per barrel; Energy
Select Sector SPDR (NYSE: XLE ) +32 cents at 77.02 April Gold: +60 cents at
$1,385.70 per ounce; PHLX Gold/Silver Sector Index (NASDAQ: XAU ) -11 cents at
212.45 What the Markets Are Saying So far, U.S. markets have all but ignored the
rush to overthrow the governments of Egypt, Bahrain, Yemen and Tunisia. Not one
of these countries produces enough oil to have significant impact on the energy
requirements of North America and Europe. But over the weekend, Libya, which
produces 10% of Middle East oil, exploded in crisis and Syria sent two warships
through the Suez Canal. On Monday, oil futures rose almost 4% and European
stocks fell sharply. So far, U.S. stocks have been immune to the upheaval. But
with some of the prime oil-producing states under siege, and the charts showing
spikes, it is time again to review our markets to see where the major support
zones lie. For the Dow, the first line of support is at the psychological number
of 12,200, and for the S&P 500, there is a similar number at 1,300. But there
are other more subtle areas of support that might be of special interest to
traders. For the Dow, it is the 20-day moving average at 12,126, which also
happens to be very close to the intermediate bullish support line, and the
50-day moving average at 11,831. The S&P 500 has a similar pattern with its
20-day moving average at 1,313 and the 50-day at 1,284. The Nasdaqs first
support is at 2,800 with the 20-day moving average at 2,771, and the 50-day at
2,716. Ive noticed that the U.S. dollar and gold have reverted to the normal
reverse correlation. In late January and early February, it looked for a time
that gold and the buck would head in the same direction, and that direction was
down. But last week, they diverged with the dollar heading down and gold up. Now
the dollar, as measured by the PowerShares DB US Dollar Index Bullish Fund
(NYSE: UUP ), is having problems making real headway and is stalled at the
resistance at around $22.60. Gold, however, broke above its 50-day moving
average and is plodding into the triple-top resistance that begins at just over
$136 for the SPDR Gold Shares (NYSE: GLD ).  What I find curious is that in a
clear crisis where the worlds oil supply may be at risk, neither gold nor the
U.S. dollar is operating in a normal way as the objects of a flight to safety.
Instead, the stock market heads higher.  Conclusion: The Fed is still buying
and those who follow their direction are ignoring the normal defensive reactions
that would normally drive gold, the dollar, and other defensive stocks and
commodities higher. The lone exception to this thesis is silver, and you could
also throw in the other industrial metals, as well they are running on a new
world inflationary cycle that for now is focused on usable materials and
consumable commodities.  For one stock that traders should take profits in, see
the Trade of the Day . Todays Trading Landscape To see a list of the companies
reporting earnings today, click here . For a list of this weeks economic reports
due out, click here . If you have questions or comments for Sam Collins, please
e-mail him at samailc@cox.net .