Oil, Unhinged

Oil continued to careen lower today, both WTI crude and Brent free falling around 4.25%. (Natural gas tumbled even more – 4.65%.) Oil-dependent nations that have been planning poorly are reeling, Venezuela and Russia among them.

Normally, the fall in oil prices would drag gold down with it. They do consistently but not always trade in tandem. That was not the case. The nosedive in oil is so sharp and so noisy that it finally is rattling the equities markets. As a guide to the impact going-going-gone oil prices are having, remember that the energy sector accounts for about 13% of the S&P 500.

The equities were having other problems, though, too. McDonald’s, on devastating same-store sales, fell almost 4%. The burger-meisters can’t seem to find a formula for the new millennium.

Onto this fire was thrown the wreckage of the Japanese economy in the third quarter, which contracted almost 2% (in annual terms).

Many analysts are betting that Japan is already recovering in the fourth quarter. The Nikkei was up ever so slightly, but you can bet gold buying has become appealing to some Japanese investors, if only until the typhoon blows over. The yield on the Japanese 10-year bond is 0.44%.

The dollar, which had been sailing high and mighty, also took a break today, like American stocks.

On a more market-specific basis, gold found some support through short covering moves and some simmering technical momentum that bulls are able to stoke on the back burner.

But, we have been seeing gold swing in a range for a while. Without seriously new fundamental info, we don’t see that changing a whole lot.

Wishing you as always, good trading,