daytrade diaries... august 20

Morning traders.

Market wrap: Stocks look set to build on yesterday's modest advances after a surge in oil prices and a turnaround on overseas markets.

European and north American share markets opened in the red after yesterday's 4.3% tumble in China, but recovered as the night wore on. European indexes finished near flat but the Dow closed 0.66% higher, the S&P 500 gained 0.69% and the Nasdaq 0.68%.

Energy stocks led the rally in the US after a surprise drop in oil stockpiles sent crude futures racing to their highest level since early June. The Amex Oil Index of US oilers rose 1.58% as crude oil hit $72.80, a rise of nearly 5%. Futures have since eased back to recently trade at $72.20.

In China, the Shanghai Composite Index has now fallen 20% in three weeks, raising fears about the country's ability to continue to fuel the global recovery. Most base metals had a V-shaped night as sentiment improved with rises in oil and equities. In the US, copper was unchanged and aluminum lost ground, but nickel, lead and zinc advanced. Gold futures rose $4 to recently trade at $942.30.

Futures traders expect our market to open a healthy shade of green. With an hour left to trade, the SPI futures index was up 41 points at 4375.

TRADING THEMES TODAY

OIL: Aside from WPL, most of our larger oilers ignored yesterday's rally in the price of oil - AWE, ROC, TAP, OSH, etc. There's a gulf between their share prices now and the last time that oil was this expensive, in early June. It won't happen in a day but that gap should narrow.

COMPANY REPORTS: A heavy week of reporting continues today with ABC, AGK, AMP, ASX, BXB, CLO, CMW, DOW, HSP, IVC, LLC, MIG, MCG, MMG, MOF, OZL, PPX, QBE and STO. Surprises to the upside will produce good trading opportunities.

REVERSAL TRADES: The nervy trading over the last five days has set up some nice opportunities to buy shares on retrace - look at LNG and GXY this week. MOL and some of the nickel miners look like prime candidates.

Good luck to all.