As Cypriot lawmakers rebuked the idea of a one-time levy on all bank deposits, the markets are acting confident that whatever is going on Cyprus is not a sign of things to come for other countries. The ECB has “called” the bluff, so to speak, of Cyprus, and is continuing to support Cypriot banks, thus we see the stock markets of both Europe and the U.S. up today.
Today is also a very important day in the financial markets because later this afternoon the U.S. Fed will release their monetary policy decision statement and hold a press conference to discuss future direction. If the Fed surprises the market and makes the discussion of curtailing QE this year, we look for a big sell-off in the S&P 500. We don’t see the Fed doing that, but it’s possible. The Fed will more than likely state that while the economic numbers have been getting better, there is no need to curtail QE as the unemployment rate is still higher than the Fed’s target.
In the energy markets, crude oil is up slightly after a big fall yesterday. After hitting the $94 level, crude has sold off to the low $90s, and is now up $.34 to $92.50. Natural Gas has experienced a big run up this month, and now is taking a breather, and is actually down $.045 today to $3.92. We believe natural gas will indeed hit and cross the $4 level before summer.
We focus more on RBOB gasoline futures today. RBOB completed a classic seasonal rally in the beginning of this year, and since hitting a high of $3.30, has sold off almost $.30 in 30 days, hitting a low of $3.02 today. This is our very important pivot level for this market. If RBOB can stay above $3.02, we believe it can head up to $3.09 resistance. If RBOB breaks below $3.02 and more sellers enter the market, we look for our next target of $2.97 to be hit. Speculation that supplies will rise as refineries complete spring maintenance and increase production is one potential cause of the recent sell-off.
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