As the market begins heading toward the first areas of support for the market indexes, we need to keep in mind that the magnitude of any correction is dependent on energy prices. Hence, we are labeling the market action for the next few weeks, a "Teeter Totter" market.

This morning, oil prices continue to hover around the $60/bbl mark:

Crude Oil $59.30 +.09
Gasoline $1.57 +.0054
Heating Oil $1.73 -.0041
Nat. Gas $14.05 +.350

In the short run, I think oil prices will remain in a tight range of
$55-$62. As we get into 2006, we will probably see a sharper correction to the $50 level, or maybe a hair lower. At the $50 mark, I would be an aggressive buyer of the major integrateds, as well as the refiners.

The December 2006 crude oil contract is currently priced at $62.60. I know this doesn't mean much right now, but it does signal that futures traders think oil prices will be higher a year from now.

Phil Erlanger at www.erlangersqueezeplay.com , had these comments on his December 6th update:

"Now that the major indices are in a pullback phase, how large will the pullback be? The NASDAQ 100 above is still working above a gap that has not been filled. At this time, we don't see anything worse than a filling of that gap (which would be a 6% retracement to the 1600 level.) Since this appears to be a break away gap, there is no need for this gap to be filled. The EBB has retreated, but is about mid-way down, and is therefore of no prognosticative help near-term. Seasonality is taking a little dip which turns back up after 12/20/2005."

"As the stock market has begun a pullback, crude oil has begun a rally. So far the rally has served to test overhead resistance around the $60 - $61 level. This level is both a broken head and shoulders neckline and is also where a downtrend resistance line exists. If crude were to break above this level, the stock market will likely pull back further. If crude falls away to lower reaction lows, the pullback in stocks is expected to be minor. In any event, the market should renew its uptrend by December 20th. Stay tuned!"

Phil is one of the best market technicians in the business. He has a knack for being able to see through market gyrations that most people cannot.