Where Are the Cries for $100 Oil?

Early last week, I discussed a rotation out of financials and into tech; by the end of the week, all we'd gotten was the rotation out of financials. Now we have the rotation into tech ... as pathetic as it's been.

I say pathetic because volume has been declining every day since Nasdaq had its low. Upside volume as a percentage of total volume has been declining as well. And it's not as though breadth has been a barn-burner either.

(You see, the rally is only a few days old and already I'm complaining!)

But let's take a look at that ratio of the Bank Index to the S&P 500. It didn't just get turned back from that downtrend line, it has retreated substantially.

It is not in danger of making a new low -- not yet at least! -- but take note that the downtrend line I have drawn in dates back to February of last year. You might recall that this whole subprime mess began in February of last year when HSBC (HBC Quote - Cramer on HBC - Stock Picks) first announced they were having problems. It escalated into that late February crash-ette.

So that downtrend line is not to be ignored. The way I see it, until that downtrend line is crossed to the upside, we are still in a risky market. The banks actually started their underperformance in the summer of 2006, but it did not accelerate until spring of last year. So I'll use spring of last year as the line in the sand.

As long as this ratio stays below that downtrend line, the problems still exist. As long as the problems still exist for the banks, the risks in the market still exist.

But of course the banks weren't the story of the day yesterday -- it was oil. So let's look at the chart of oil. Before we do that, sit back and ask yourself when you last heard anyone chattering about $100 oil? Nope, all we've heard lately is about the recession and how oil prices are sure to come down.

I have been asked if it's a head-and-shoulders top. Sure it is. But before you run out and short it, note that this high is higher than the previous one. Also note that it managed to do so in two short trading days. And if you squint hard enough, you can see Friday's volume was actually up vs. the previous two weeks'. Yes, I know that Venezuelan President Hugo Chavez's crankiness is the reason for the move, but remember: it's not the news, but the reaction to the news that counts. And the reaction so far has been quite positive.

I think we'll back off from this $95-ish area, but we are not yet done on the upside. Why? Because I think we're going to get around to hearing cries of $100 oil again. Right now, everyone is full of excuses as to why oil is up. Chavez, the weather, OPEC. Just wait till they declare the U.S. is out of recession (that was quick!) and here comes $150 oil. Then we'll know the excuses are gone and everyone is a believer again.

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This article was written by Helene Meisler, whose newsletter "TheStreet.com Top Stocks" gives readers daily investing ideas based on a study of technical analysis.