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Oil Futures Rise On Egypt Unrest; Exxon Crushes Earnings

 January 31, 2011 04:09 PM

The futures are edging higher Monday despite escalating unrest and lawlessness in Egypt. The scene from Northern Africa over the weekend were shocking, but investors are choosing instead to put Friday's sharp decline behind them and focus on a mostly upbeat earnings season to date. Next up is the largest American company by market cap, Exxon Mobil Corp. (XOM), which reported $1.85 earnings per share this morning vs. the $1.62 expected and $1.27 in the year ago period. It's the largest quarterly profit for the oil giant since third quarter 2008.

Oil futures rose over the weekend amid fears that global supply will be disrupted due to the possible closing of the Suez Canal. Egyptian officials have maintained that traffic will continue to run smoothly, but the presence of the protests so close are sure to continue to cause uneasiness. The real firestorm in oil would come if, for any reason, the unrest from Egypt spilled over into oil-rich Saudi Arabia.

Playing Egypt

Keeping with the Egypt theme, Scott Redler of T3Live.com believes the situation could be a catalyst for gold and silver prices to recover after significant pull-backs. The fear trade is back on the table. Apache Corporation (APA) is an energy stock to watch on that front, as 20% of production and 30% of revenues come from Egypt, where the company and government have a 50/50 joint venture. APA was down more than 13% off recent highs at one point Friday before recovering slightly.

There have also been reports that rioting has and will continue to spread into Turkey. The Turkish stock market has been hammered on the news, and the decline accelerated harshly Friday. The iShares MSCI Turkey Index Fund (TUR) was down 7% Friday. Another ETF to watch for downside action is the SPDR S&P Emerging Middle East & Africa ETF (GAF).

Magnet: Watch AFOP After Near-Breakout Friday

Huge technical and psychological damage was done in Friday's session. The advance-decline line was over 4 to 1 to the downside. From the NASDAQ losing its data feed to pictures of riots in Egypt, it became an issue of shoot first and ask questions later.

Interestingly, neither the SPX or OEX have even put in a column of O's on Point & Figure charts, but they are close. It's an overbought market from that stand point, but several Magnet stocks look closer to the "bottom of their envelop" than the top.

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