Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
Silver Price Trend Forecast - 29th Jan 20
The "Everything Bubble" Just Burst. Here's Why - 29th Jan 20
Trump vs Cortez - Clash of the Titans - 29th Jan 20
Why Palladium Is on a Tear - 29th Jan 20
The Platinum Breakout & Bull Market of 2020 - 29th Jan 20
Coronavirus Infection Spread and Deaths Forecast 2020 - Video - 28th Jan 20
Is an Accommodative Fed Bullish for the Stock Market? - 28th Jan 20
Trillion-Dollar Stock Market Cap Club - 28th Jan 20
Corona Virus Wuhan Global Pandemic 2020 Deaths Forecast and Market Consequences - 28th Jan 20
Palladium Surges above $2,400. Is It Sustainable? - 27th Jan 20
THIS ONE THING Will Tell Us When the Bubble Economy Is Bursting… - 27th Jan 20
Stock Market, Gold Black Swan Event Begins - 27th Jan 20
This Will Signal A Massive Gold Stocks Rally - 27th Jan 20
US Presidential Cycle Stock Market Trend Forecast 2020 - 27th Jan 20
Stock Market Correction Review - 26th Jan 20
The Wuhan Wipeout – Could It Happen? - 26th Jan 20
JOHNSON & JOHNSON (JNJ) Big Pharama AI Mega-trend Investing 2020 - 25th Jan 20
Experts See Opportunity in Ratios of Gold to Silver and Platinum - 25th Jan 20
Gold/Silver Ratio, SPX, Yield Curve and a Story to Tell - 25th Jan 20
Germany Starts War on Gold  - 25th Jan 20
Gold Mining Stocks Valuations - 25th Jan 20
Three Upside and One Downside Risk for Gold - 25th Jan 20
A Lesson About Gold – How Bullish Can It Be? - 24th Jan 20
Stock Market January 2018 Repeats in 2020 – Yikes! - 24th Jan 20
Gold Report from the Two Besieged Cities - 24th Jan 20
Stock Market Elliott Waves Trend Forecast 2020 - Video - 24th Jan 20
AMD Multi-cores vs INTEL Turbo Cores - Best Gaming CPUs 2020 - 3900x, 3950x, 9900K, or 9900KS - 24th Jan 20
Choosing the Best Garage Floor Containment Mats - 23rd Jan 20
Understanding the Benefits of Cannabis Tea - 23rd Jan 20
The Next Catalyst for Gold - 23rd Jan 20
5 Cyber-security considerations for 2020 - 23rd Jan 20
Car insurance: what the latest modifications could mean for your premiums - 23rd Jan 20
Junior Gold Mining Stocks Setting Up For Another Rally - 22nd Jan 20
Debt the Only 'Bubble' That Counts, Buy Gold and Silver! - 22nd Jan 20
AMAZON (AMZN) - Primary AI Tech Stock Investing 2020 and Beyond - Video - 21st Jan 20
What Do Fresh U.S. Economic Reports Imply for Gold? - 21st Jan 20
Corporate Earnings Setup Rally To Stock Market Peak - 21st Jan 20
Gold Price Trend Forecast 2020 - Part1 - 21st Jan 20
How to Write a Good Finance College Essay  - 21st Jan 20
Risks to Global Economy is Balanced: Stock Market upside limited short term - 20th Jan 20
How Digital Technology is Changing the Sports Betting Industry - 20th Jan 20
Is CEOs Reputation Management Essential? All You Must Know - 20th Jan 20
APPLE (AAPL) AI Tech Stocks Investing 2020 - 20th Jan 20
FOMO or FOPA or Au? - 20th Jan 20
Stock Market SP500 Kitchin Cycle Review - 20th Jan 20
Why Intel i7-4790k Devils Canyon CPU is STILL GOOD in 2020! - 20th Jan 20

Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Stock Market and Crude Oil at Critical Trading Levels

Stock-Markets / Financial Markets Jul 21, 2008 - 05:43 AM GMT

By: Adam_Perl

Stock-Markets Best Financial Markets Analysis ArticleOver the last couple of months we have been witnessing the outcome of constant aggressive monetary policy. The Fed has used all its weapons to try to keep the U.S economy out of recession, but at the same time they have spurred inflation. With a current fund rate of merely 2%, the Fed has found itself between a rock and a hard place, combating deteriorating economic growth accompanied by accelerating inflation.

Similar to previous trading weeks, last week was characterized by high volatility, with Crude oil taking center stage. From a high of $147.31 to a low of $128.95 per barrel, crude sparked major movement across the board as it dropped, sending major indices rallying. Even though this black gold was in need for a major correction, it seemed to be very convenient that prices experienced major declines following the Fed's statement, insinuating that the U.S economy is facing significant growth risks, which could affect consumption. Is the Fed using yet again one of its famous tactics – affecting market prices by issuing statements about the future, trying to put a lid on commodity consumption, or is the economic slowdown, which has been affecting all sectors, finally starting to take its toll on commodity prices? The selloff in crude immediately started a snow ball effect, as traders closed their long positions transferring their money to an oversold equity market. Taking a glance at a crude oil daily chart, one can see the extreme sell off which sent crude plummeting, breaking major trend lines.

* Charts courtesy of

One has to remember that one of the main factors preventing the Fed from answering the markets with further rate cuts are the current high prices of consumer goods, with crude oil at the top of the list. If the Fed can bring down inflation levels with “no-cost” actions such as issuing statements, returning confidence in the markets, money will surely find its way back into riskier assets, seeking high returns. Especially, as many of those assets will start to yield positive returns and not real negative returns, due to 5% yearly inflation.

Even though I am sure that most of us today have stopped fantasizing about $70 or $80 per barrel of crude, if commodity prices manage to retreat to more tolerant levels, the commodity market will lose its attractiveness as traders will search for new trends.

Looking at the overall picture, the financial markets are currently trading at critical levels:

  • Major equity indices have formed classic reversal patterns but have yet to break down trend lines.
  • S&P 500 (SPX) is facing major resistance which was once classed as major support.

  • The housing sector received its first signs of relief on Thursday, as housing starts (yearly) and building permits both beat expectations.
  • The financial sector (XLF) is trading around 2003's lows, which was the bottom of the 2001-2003 mild recession- this will surely have a psychological affect on the markets.
  • Even though the financial sector is showing continuous losses, individual reports from certain financial institutes like City Group are publishing less horrifying results, lifting market spirits.
  • The VIX should be observed very carefully as a weekly chart shows that the fear in the markets are around previous high levels, area that have tended to lead to an equity bounce.

In addition, from a technical point of view, a major trend line was broken and recent candles could be indicating to a turn in trader's sentiment.

Even though the points stated above are showing only the positive aspects of recent market occurrences, one must not forget that the markets are not out of the deep water yet and investors should not be surprised if they hear more incidents like Freddie Mac and Fannie Mae. In addition, there is one factor that continues to remain a major burden on the U.S economy: The U.S dollar.

Despite the steep drop in oil prices last week the U.S dollar finished the week with mild gains of only 0.38%. As mentioned above, it will only take additional bad headlines to re-insert fear into the markets, sending investors back into the commodity sector, especially as the Dollar is having trouble to recuperate and is still low valued. While the last couple of trading days have been spirit lifting, defensive trading is considered to be the best strategy in a volatile market.

By Adam Perl

I am a currency strategiest, I have over 6 years of personal experience trading stocks on the American stock exchange and the Foriegn Exchange. I am also a private trader and coacher for the financial markets. I am also launching a website over the summer.

Information reliability and liability : The contents are solely aimed for the use of "Experienced" investors in the financial markets who are fully aware of the inherent risk of trading. I, “Adam Perl”, do not accept any liability for any loss or damage whatsoever that may directly or indirectly result from any advice, opinion, information, representation or omission, whether negligent or otherwise, contained in our trading recommendations. I make no warranties or representations in relation to the Information (including, without limitation, in relation to its accuracy or otherwise) and do not warrant or represent that the services will be error free or uninterrupted.

Copyright : This article is subject to and protected by the international copyright laws. Use of the information brought in this article is subject to making fair use only in accordance with these laws. It is not permitted to copy, change, distribute, or make commercial use of the information except with permission of the holders of the copyright.

Risk Disclosure : The risk of losses involved in the transaction or speculations in the financial markets can be considerable. Please think carefully whether such trading suits you, taking into consideration all the relevant circumstances as well as your personal resources. Speculate only with funds that you can afford to lose.

Adam Perl Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules