Oil looks heavy while the stock market is in a Fed induced stupor. A rumor overnight of a blast in the Suez Canal was denied by the Egyptian military yet is a reminder that we have seen the market put in a sizable Egyptian premium.
The market action this past week clearly demonstrates the extreme sensitivity to any news related to the U.S. Federal Reserve. Many market participants are taking a step back before the latest rates announcement from the FOMC.
The concept of a “jobless recovery” is a bad joke, and the true unemployment and “underemployed” figure is closer to 17%. The “house of cards” is going to collapse at some point and I suggest strongly the implementation of protective strategic hedging programs.
The “Bernanke two-step” started the markets on a collision course as his statement two weeks ago led traders to believe an end to QE was imminent. Then last week he corrected his comments by stating that the QE would continue.
Oil had a hard time deciding whether or not it wanted to continue its upward trajectory. While Egypt continues to simmer and we saw more violence, the truth is that the fears of an immediate risk to supply seems to be waning.
Most commodities suffered losses tied to the "rush" to avoid missing the "equity boat." Our view is that the name on the side of the "boat" is Titanic. Market extremes dictate an equally dramatic correction will occur.
I have been telling my clients that for WTI crude oil to get above $100 a barrel we would need an event. Not only did Egypt's President act defiant against military demands, then we had a big drop in American Petroleum Institute's supply report.