Asia is down today and Europe is up slightly while US futures look improved but all that is meaningless until the 8:30 jobs report.
I have blogged the planet all night and my conclusion remains that we are experiencing a global rotation out of Asia and into US equities. This could have been predicted by those who follow the dogma that, once you read about something like the resurgence of Asia on the cover of Newsweek, youÂ?ve already missed the boat.
So our money took a slow boat to China and now it is on the way back but it looks like it may be getting wired back so we might get a pretty quick reaction. If I’m right, then the markets will hold their critical levels today and Monday.
This is a unique opportunity to watch as virtually every index but the AMEX (which is still very strong) is resting at right about the 50 dma. Every index is also forming a nice flag pattern on the 40 week moving average that can easily signal a strong upside breakout if we can make new highs.
Gold is being held down by continued dollar strength (thanks to that last rate hike, we are simply paying more interest than anyone else if you buy our money) but it will be very surprising if the dollar can crack $1.20 for the Euro so we are close to what at least should be a resistance point on currency. Don’t forget we have a March 20 flood of dollars coming back from the shift of oil contracts to Euros but this will not occur to CNBC until March 1st (it’s too complicated to be a good story anyway).
Oil now has to contend with $65. If the IAEA does not sanction Iran today (they won’t) then we could lose another $2 today on the way to a full meltdown. We have 15% more natural gas in storage than we had last year at this time and it cost 35% less at the time! So fear factor = 35%, just like oil which was at $43 last Feb 10th!
Last Feb, XOM was at $42. My old readersrememberr the old rule: “The price of Exxon = the price of a barrel of oil.” Sales at Exxon are meaningless, what you are paying for is a company that holds the contracts on 10% of the planet’s oil.
Now let’s look at the facts:
Natural gas went from $6 last Feb to $15 in Sept/15 – 12/5, then collapsed to $8.50. Why?Because it has a limited season and there is too much.
Gasoline went from $1.25 last Feb to $3 in late August, then collapsed to $1.63. Why? Because there is nowhere to put excess gas, it must be sold at whatever price it takes.
Oil went from $42 last Feb to $70 in late August, then came back to $67. Why? Because it’s a shell game!!! Terror, fear, pipeline attacks, political unrest, nuclear war!!! Believe me if McDonalds thought that would jack up the price of burgers they’d dress mayor McCheese up in a burka and give him a rifle.
This fear factor works for oil because we have no alternatives. Mad cow doesn’t drive up the price of chicken because we have fish and bird flu doesn’t drive up the price of beef because we have pasta. But oil is it!
This is why Mr. Bush caused an international crisis yesterday when OPEC freaked out about his statement in the state of the union address that we “reduce America’s dependence on Middle East oil imports by 75 percent by the year 2025.” Now I didn’t even comment on this one because it was such BS that I just ignored it but the people who have the oil apparently haven’t slept since!
So now the guys running the shell game think the cops might be coming around the corner. Do they run? No, not while there are still suckers around – but they do “cool it” a little. “Hey guys“, they will say, “there’s no oil crisis!” “Don’t go throwing your money away on that silly solar energy, who knows how long the Sun will last? Look, I found a little extra this week, you can have it for $55 since you’re such a good customer…” OK, maybe I’ve lived in NY for too long but I’ve seen this game played enough to know the outcome.
We may be “addicted to oil” but they are addicted to money and, as long as we consume 35% of the world’s oil, we still get a little attention when we are an unhappy customer.
Bush played this one just right, sometimes all you have to do to get a discount is threaten to take your business elsewhere!
