Yields are climbing on stocks, dollar is just plodding higher, commodities are getting killed, Treasury yields are getting even more non-existant. Good day for the market to sell off.
The lack of confidence in a stronger dollar is still the number 1 problem with the US market. The damn thing can't stay down forever!
So, the play from here is to start looking for a near term peak in the dollar to move all cash back into the market from the sidelines. I still think oil prices have another $5 to $10 to flush out the $100 area. $96 is better than $100, but still too close to $100 to accomplish anything with lower oil and gasoline prices.
Longer term, I think gas prices will flush out to $2.50 on RBOB futures. Long term might be shorter than people thing if the DXY can cruise through $80.
The way the media reports falling oil prices is so stupid. They actually buy into the fact that high oil prices are a sign of economic strength. I guess it's part of the liberal, pro inflation agenda that should be expected from the press.
If the correlation trade continues to run much further, down oil - down US stocks, then we should hope for a really steep plunge to clear all the premiums in oil as quickly as possible. If we could get oil prices down another $5 this week to close around $90, the crude curve is going to be flattened from $90 to $85 long term. At some point, we need to see Brent prices start falling faster than WTI prices to really drive energy prices over the edge.
Anywhere in the high $80's, I think the majority of the selling pressure will be out of the way. As people reflect on $3.50 gas, they still won't feel too happy about the Inflation game in oil, but it's better than $4.00. At $3.00 gas, people will be conditioned to feel that's the best it will get. Still a lot of demand destruction at the $3.00 level, but it frees up alot of disposable income to be put to work somewhere more productive. |
