They Call It Stormy Monday

Oddly enough,  important indicators in all markets fell, as money pulled back to reconnoiter about the Federal Reserve, interest rates and the U.S. economy in general.

West Texas Intermediate crude continued its renewed slow descent, at one point shedding almost 3.00% in price before recovering in late afternoon trading to a mere 2.90% loss. Brent North Sea oil was off slightly less, giving up about 2.40%.

It was reported today that Iran not only has refused to freeze its production levels but will increase output. This seems certain to kill a deal that would have seen OPEC and Non-OPEC producers unite to curb production.

Pandora’s oil drum is open and we don’t think there is much that is at hand or on the near horizon to push prices to a more profitable $50-to-$60 range.

Weaker oil hurt equities even though the healthcare sector was up extremely strongly. We will have to keep an eye on oil volatility for some time, because we are in a trough right now where Fed news and actions recede and we have yet to open up a new round of earnings reports. Oil therefore will maintain its position as a major prevailing market wind.

And some seemingly less influential matters will push equities’ prices around. (Overseas stock markets, for instance.) Those matters certainly include oil volatility. To a lesser extent currency trading will hold sway as well.

Speaking of currencies, the U.S. dollar held weaker today with the yen and British pound performing well against the greenback. The euro was largely unchanged and the Swiss franc and Canadian dollar fell against the American currency.

Unfortunately this tells us nothing about sentiment, giving us no indication about haven players’ attitudes.

Regarding that, judging from gold’s decline by about half a percentage point at 4PM in New York, you would think risk-on was the mood of the day; as we see in the equities trading that is absolutely not the case.

Additionally, the 10-year U.S. bond yield fell marginally. That, too, indicates less interest in safe-haven moves.

Perhaps our stormy Monday will move on tomorrow. Wait-and-see cloud covers can often hover for some time, however. Maybe the Wisconsin primary will tell markets something new.

Wishing you as always, good trading,