Asia is up and Europe is down slightly, which is amazing with a nationwide strike in France and an imminent strike in England – if that were happening here the markets would be in a nosedive!
Our pre-markets are down and will stay that way until the Fed announcement this afternoon, as if something unexpected will happen. I think the only real issue is can Bernanke be as obfuscating as his predecessor, which is a tough act to follow.
I am hoping Bernanke takes my advice to raise rates a full half point and say they are done through the Summer, this will punish and relieve the market at the same time and give the Fed a chance to measure the impact without pushing things too far.
It would be so easy to crash the markets with a poorly chosen word and I’m sure Ben knows this and will be very careful but be warned that the markets are currently looking for almost any excuse to sell off. The Dow is in the weakest position and if it breaks 11,200 I will seriously be considering moving back to all cash!
While a pullback would be healthy and possibly even necessary, there is no reason I should sit through it stubbornly holding stocks that drop and drop. The S&P is also very vulnerable if it closes below 1,300. Ironically, the Nasdaq is currently showing the most strength.
Oil is going up and up and up for no reason other than the Nigerian rebels. I’m not sure when Nigeria snuck up and passed Saudi Arabia as the world’s most important supplier of oil (it was 8th) but you would think they did from the press this is getting. This has been going on all year and our stockpiles have gone up and up so I think oil traders should start to fear what might happen if the pipelines aren’t destroyed, if we don’t have a major hurricane and if Iran doesn’t start nuking it’s neighbors on July 4th because all of that is priced into a barrel of oil at the moment.
Let’s not forget that we predicted that oil prices would rise as part of the back door deal that took the Iran Oil Bourse off the table last week. $70 oil may be the price we pay for a stable Dollar!
We need to be patient but make sure you have cash to take advantage if the oil sector crashes, hopefully we can get a nice rise from here to set up for a 20%+ correction!
Gold pulled back $2.50 overnight to $565 so it’s up to the US traders to raise or fold today. ABX and NEM still have a long way to run if gold can break $570 and hold it for a day or two. Look for gold to test $570 before any pullback.
LEN beat estimates and reaffirmed guidance so the homebuilders should fare well today but it will be up to Google and MSFT to move the Nasdaq today.
Andy Card resigned as Bush’s Chief of Staff, who knows what that’s about but the situation certainly bears watching!
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I’m really not into buying anything today. Mostly looking for chances to take stuff off the table until this afternoon then going plus or minus depending on the reaction to the Fed announcement. Bear in mind that this is the end of the quarter and funds may go crazy on a lot of things this week so it is choppy waters at best.
We can’t play the builders into fed minutes.
We can’t play oil at $65 when we know the price is based on a Nigerian “warlord” threatening to disrupt part of the 1.5M B/d that Nigeria is currently producing (1.5% of the world’s supply).
The bigger driver on oil is demand and traders are hanging their hats on China, which pulled 4.4% more oil in February than it did a year before. Although Chinese demand is just 6.6M B/d, that increase (450K B/d) plus the 600K B/d lost in Nigeria at this stage does, in fact take 1% of the world’s supply out.
The problem in Nigeria is terrible, we (US and British Oil) have raped their land, enriched a corrupt government and destroyed an ancient culture all because we don’t want to count on the Saudis to supply us with oil.
http://www.sundayherald.com/54846
So the World is down to 1% less oil on the market than we had last year at this time. How much was oil then? $50!!! And that was after doubling from the year before on increasing demand, supply disruptions and possible hurricanes. We never learn do we?
Bottom line is the markets can’t beat $65 oil no matter what the Fed says and unless Bernanke realizes this and takes another hike off the table, we could be looking at something very nasty!
Why is $65 oil so bad? Because it’s not a true reflection of the cost. It is one thing if the $65 you pay goes to enrich workers and production teams and exploration companies etc. because it would flow back into the economy (trickle down theory) but $20 or more of what you pay is a “fear premium” that it being taken by the traders who have no interest whatsoever in seeing it end.
They take no actual risks, they just tell you that you’d better pay them $65 a barrel now if you want to be sure there will be a barrel there next month because “you never know” what might happen. They tell you this even though there hasn’t been a month in which the barrel didn’t show up since 1977!
So cash cash cash except for Google, as long as it stays above $365 and NEM and ABX as long as gold stays over $565.
Good trading,
– Phil
