The oil market popped in its bullish New Year celebration as the funds that were scared out by the fiscal cliff start to come back in droves. Even as the euro currency faltered on a rebound yen the risk trade in oil will still find a way. The seasonal run in oil is strong and despite a pull pack on concerns about a Fitch downgrade after it became clear that the bulls are back in oil. Oh sure traders are taking some profits today as it starts to sink in that the deal to avoid going over the cliff was a spending bill not a real deficit reduction bill. We know that sometime soon that we will start this whole cliff charade all over again. Even Moody’s was not amused as they made it clear that this deal was not enough to remove the risk of a downgrade of the U.S. credit rating. Add to that we are going to be facing another cliff, enjoy the ride for the next month or so.
In the meantime, the focus for oil will be monetary policy both here and abroad. The Fed Minutes may give us more insight on oil than anything that the inventory reports will have to show us. With the yen rebounding a bit the euro fell making the so called risk-on trade a bit unrecognizable. The Fed Minutes should make clear the Feds money printing intentions and may even give us a hint to their intentions in the event we actually get a cliff deal. More than likely we should get a boost as we will be reminded that the Fed Printing presses are revved up and ready to go.
So much for the cold blast! Temperatures are starting to warm up adding pressure to the Nat gas. The Market broke out to the downside of its upward technical channel and the technical traders may exit in a big way. The funds will stay away as it will wait to see if the warmer forecasts start to hold up. That $305 low should be tested again.
Gold and silver are back as the traders that exited for the cliff are back in. Funds should start adding to one if the best performing sectors of the last decade. Look to buy breaks.
Has coffee finally bottomed? It looks like it. Buy a pull back. Oj got hit hard as the weather in Florida is warm. Still the OJ crop is still going to come in poor due to disease. Look to buy breaks.