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Earlier today, the news was released that consumer confidence has dropped again. There had been hopes for a modest increase in consumer confidence ahead of the holiday shopping season, but employment concerns continue to weigh on consumers. The news sent the stock market lower in early trading, as investors worried that this vital segment of the economy would not be recovering anytime soon. However, things are taking a new direction, thanks to an upturn in oil prices.

Energy stocks rise, bring up the Dow

Energy stocks are on the rise, though, thanks to the latest movement in oil prices. MarketWatch reports on the response of the Dow to gains by oil:

U.S. stocks turned firmly up in mid-morning trade Tuesday, as crude oil futures rebounded from early weakness on optimism ahead of supplies data, lifting the energy sector of the market. …

Crude oil futures recently gained 67 cents to $79.35 a barrel, as traders weighed prospects of stronger Chinese demand ahead of U.S. inventories data due later Tuesday and on Wednesday.

Yesterday, energy stocks couldn’t hold onto gains, and were overcome by financial companies and sinking oil prices. Today, the opposite is happening. With the most recent report out of China about its likely economic report, speculators expect that oil prices will rise as China uses more oil to fuel economic expansion as we move into 2010.

The Dow still remains short of 10,000, and it is not likely to reclaim that level today, but there is a chance that, if things continue to move in this direction, we could see Dow 10,000 again by the end of the week. On the other hand, of course, any new economic data and concerns about economic recovery could change everything around, and send the stock market plunging again. We truly are at a very delicate and volatile crossroads.

Disclaimer: I am not an investment professional. Nothing in this piece or on this Web site should be construed as investment advice. Before making investment decisions, do your own research and/or consult with an investment professional. All investment comes with the risk of loss. You are responsible for your own investment decisions and any loss that may result from your decisions.

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One of main features of day trading is profit taking. Today, profit taking is a major reason that the Dow is slumping in a direction that could very well take it back below the 10,000 mark. In profit taking, the goal is to get out when you have profits. In most cases, these profits are not necessarily large. They are often small, as investors take what they make to avoid the chance of loss later on. (The opposite of this is running profits, in which you try to keep going in the hopes that your profits will get bigger and bigger, attempting to sell just before the investment turns around.)

Profit taking is a strategy that can be used with most investments. Day traders use it with stocks, and it is a very popular technique for active forex traders. Some commodities and futures traders use profit taking as well. Profit taking is a way to ensure that your losses are limited, since you get out as soon as a position is profitable for you, whether than waiting to see whether things get better. You end up with a lot of small profits, rather than one huge payoff. On the other hand, you are less likely to sustain large losses, which is a very definite risk of running profits.

It is important to be careful when you use profit taking as an integral part of your investment strategy. Every time you place a trade, you end up having to pay some sort of a transaction fee. And, of course, the taxes on short term capital gains is larger than the taxes you pay on long term capital gains. So if you are not careful, your profits can be eaten away by taxes and fees.

Disclaimer: I am not an investment professional. Nothing in this piece or on this Web site should be construed as investment advice. Before making investment decisions, do your own research and/or consult with an investment professional. All investment comes with the risk of loss. You are responsible for your own investment decisions and any loss that may result from your decisions.

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It’s an exciting day for bulls. The stock market is broadly higher today, with the Dow making a run at 10,000. Indeed, the stock market rally seems bent on making Dow 10,000 a reality by the end of the week. In addition to that, oil prices have touched $75 a barrel. While they are lower now, the fact remains that they have reached that 2009 high, and there are hopes that oil prices, and other commodities, could move even higher.

Stock market rallies on earnings news

Third quarter earnings are sending the U.S. stock market higher today. One of the big factors is the report from JP Morgan. Large quarterly earnings are being reported, and not even the news about non-performing assets can dampen investor spirits. JP Morgan is providing hope that other financial sector companies will also see some success. Since the financial sector is the cornerstone of Wall Street, there is a great deal of interest surrounding how well the large banks and investment houses do.

Oil prices head higher

The stock market rally is also providing some support for oil prices. Even though oil prices have pared earlier gains, they still touched $75 a barrel earlier today. There are hopes that a stock market rally is indicative that the U.S. economy is getting ready to turn a corner and start a recovery in earnest. Oil prices are expected to gain as economic recovery increases demand for petroleum and petroleum products. Also helping oil prices is the idea that China is ready to ramp up its industrial operations.

With the optimism right now, it is little wonder that riskier investments are being preferred right now. However, it will take a little while to be sure that things really are turning toward recovery. Until then, volatility is likely to remain.

Disclaimer: I am not an investment professional. Nothing in this piece or on this Web site should be construed as investment advice. Before making investment decisions, do your own research and/or consult with an investment professional. All investment comes with the risk of loss. You are responsible for your own investment decisions and any loss that may result from your decisions.