Now the reason is oil, oil and more oil. Oceans of the stuff, rivers, lakes, streams. It’s a far cry when, sometime around 1975 it was predicted the whole planet would be out of oil by 2005.
The Dow has been riding the nauseating roller coaster as crude takes its toll on analysts an traders. At one stage, early in the day, the DJIA was up to 1657. Then it plunged below yesterday’s close. Then up… then lower still. But as we approach the close for the day, the Dow is back up about 115 points or 0.70%.
The S&P 500 and NASDAQ are holding similar gains on the day, although the S&P is a bit of a laggard.
In Europe, the German DAX and French CAC 40 were up a bit more than 1.5%. The FTSE was up just about a full percent. So, North America and Europe look solid.
Asia is still washing some fear and the volatility that accompanies it out of the prices of equities. The Nikkei, which had been performing strongly, finally succumbed to the waves from Shanghai. The Nikkei closed down 2.71%. Hong Kong was weaker but held its losses under 1.00%. Finding buying opportunities, bargain hunters big up Shanghai, although traders were acting wary.
The U.S. dollar was stronger today as the needle seemed to point to a more risk-on attitude globally. A strong dollar is generally bad for the price of commodities and today fit the stereotype handsomely.
Dollar strength helped to drag gold down $3.90, a dollar ninety of that due to dollar muscularity. Palladium was knocked around some more but most of its loss could be attributable to regular trading.
Crude oil continues to be scorched by market forces that Saudi Arabia unleashed and now cannot control. Although it sounds like a cultural insult, it is entirely accurate to say that the low-oil-price genie will not be put back in the magic bottle anytime soon.
West Texas is trading in the $30.50 range. Brent North Sea is a little higher but is shadowing the great decline of “black gold.”
The yield on the 10-year bond fell fairly dramatically as the face price rose. This should tell us that there is a lot of risk averseness afoot but the changes in pricing and yields are too miniscule to matter. Big organizations that buy bonds can take advantage of this sort of static trading more readily than the proverbial “little guy,” but really there is not much action.
A lot will hinge on the next Fed meeting. And that meeting’s outcome will continue to hinge on how far down the rock bottom oil prices drag the rate of inflation.
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Wishing you, as always, good trading,
Gary Wagner
thegoldforecast.com
