Fundamentals Out Of Focus

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The precipitous drop in crude is being factored into the equities markets this afternoon, as we can see after prices in New York bounced off the day’s low. This has profound implications for the bull market we’ve experienced recently. Once the jitters are gone over oil, a more bullish attitude will prevail – for a while, anyway. Additionally, the dollar regained its footing against the euro and the GB pound, another sign that stability is returning since yesterday’s tumble.

Crude and gold often trade in tandem. This has not been the case recently because 1) crude stockpiles in the U.S., once the true numbers were made public, have had a major impact on price, and 2) gold saw its shakeout and is trading in a reasonable range, comfortable in its own skin.

Getting near the closing bell, the Dow is off 0.33%, the S&P 500 off half a point. The NASDAQ has suffered a little bit more because of its computer/electronics tilt. Apple has been hurting the index.   

While oil has been the focus of the decline in stocks as of late, the true culprits are Europe’s anemia, China’s first bonk against the glass ceiling of growth experienced by most third world countries, and Japan’s deep quandary as to how to boot its economy in the backside.

Europe, aside being hamstrung by terrible economic philosophies, is now being hampered by the renewed, deepening financial crisis in Greece. One might ask, “What does Greece think will happen if it doesn’t adhere to austerity, (in or out of the euro-framework)? Nothing good can come of it. Debts will still be owed, the youth cannot support the old, and it will still have a backward economy.

Now it is apparent the slow growth in those other regions will slow down America’s stellar recovery. The perception, in turn, is now slowing equities growth in the U.S.

One indication of how desperate Europeans are becoming is that French President Hollande is calling for easing of sanctions against Russia. This is like the cartoon kid scraping together every nickel he or she has to buy a toy – turning over chair cushions, so to speak. France falters. France needs contracts from Russia. France wants sanctions to stop.

Meanwhile, back at the oil patch… Saudi Arabia announced today that it was raising prices to Asian customers at the same time that OPEC announced it would follow suit. Interestingly, OPEC also said it was lowering its prices to Europe modestly and quite a bit to the United States. They want to rekindle consumption. That might be a strategy of the past.

Further, the White House said this afternoon that President Obama would veto the Keystone pipeline project. It does seem the project, regardless of the validity of environmental criticisms, is coming to the floor of Congress at a most inopportune time.

If crude keeps dropping and the rest of the world’s economies keep floundering – a big “if” – it will take only a few more months before the U.S. joins the wake. The above-mentioned countries and the EU need to start stimulating.

Indeed, it is hard to get the whole picture in focus, fundamentally speaking.  

Wishing you as always, good trading,

Gary S. Wagner - Executive Producer