NEW YORK ( TheStreet) -- The weak employment data were a signal to energy traders that demand for gasoline on Main Street in the U.S. remains weak. Thus, crude oil fell to less than $100 per barrel on Friday to a low of $95.34 Sunday evening. As recently as May 1, energy traders were yelling "breakout" as oil traded for more than $106 on the stronger-than-expected ISM data.
Another reason for recently lower oil prices was the decision by the CME to raise margin requirements. I was skeptical about the upside for oil, as I saw gasoline prices begin a slide of 30 cents per gallon two weeks before the ISM report. With a civilian labor force participation rate of only 63.6% in April, demand is even weaker than analysts' expectations For the overall stock market, the fundamentals are favorable, as our Web site ValuEngine.com shows that 64.3% of all stocks are undervalued. The Sector Valuations are mixed as 10 of 16 sectors are overvalued. The Oils-Energy sector is 8.2% undervalued. ValuEngine.com tracks 539 energy stocks, and 152 of them are rated Buy. I will profile my "Buy and Trade" strategies for the stocks that have been in and out of my ValuTrader Model Portfolio so far in 2012, but first let's look at the weekly chart for crude oil to evaluate the weakening technical picture.
Chart courtesy of Thomson/Reuters The weekly chart for crude oil is negative as oil closed on Friday below its five-week modified moving average at $102.88 with declining MOJO (12x3x3 weekly slow stochastic) readings. The downside is toward the 200-week simple moving average at $81.97. My semiannual value level is $79.83 with my quarterly pivot at $101.55, and annual, semiannual and monthly risky levels at $103.58, $104.84 and $108.53. Note that Friday was an outside day to the downside, defined by a high above the prior day's high with a close below the prior day's low. The next major issue for the energy market is that hurricane season begins on June 1. The most current forecast I read calls for nine named storms, but only four are expected to become hurricanes. If there are newer forecasts showing potential increased storm activity, that could fuel a rebound in the Oils-Energy Sector.