OIL/EQUITIES INVERSION CONTINUES….

Another interesting overnight session is unfolding as equity futures surge higher and oil prices retreat 1.5%.  Rumors in Libya are flying fast and furious these days.  The one thing that is certain is that the equity markets appear to be hostage to the oil markets.  This evening’s decline in oil prices is providing some relief to equity prices.

The more interesting occurrence might actually be the 1% decline in copper prices.   I don’t want to read too much into one night of action, but the divergence in copper and oil has been most obvious in the last month since oil prices began surging and investors started selling copper due to economic growth concerns.  A continuing decline in copper prices (regardless of the action in oil) would not bode well for equities going forward….

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Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.

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Comments

  1. On a daily basis, Copper is close to validate a Head&Shoulders pattern.
    Whether it achieve or not will tell us the next story for equities.

  2. Are equities really hostage to oil proces? They barely flinch when oil surges multi $$ in a session. The most immaterial declines in oil prices, and Im talking merely from a session’s intra day high not on an absolute basis, result in significant equity rallies.

    Nothing has changed relative to the past 6 months – QE is all that matters.

    Equities will continue to march higher. Alas, markets have a free lunch and get out of jail card until at least the end of June. The most logical thing for them to do is to use it.

  3. The equities market is looking 3 to 6 months ahead, and it is plateauing now because investors sense that QE2 probably will not be extended beyond 6/30. If the incoming economic data starts to weaken, the equities market could put in a top here, it may not wait until June.

  4. A few years back Eddie Murphy did a skit on Saturday Night Live where he discovered what African Americans presumably suspected about white society. Disguised as a white guy, and out of sight of any black people, he found that everything was free. The bus driver wouldn’t take his fare, the news-stand vendor refused payment for his morning paper, breakfast was free at the restaurant, and so on.

    No wonder whites were further ahead on the economic scale; blacks paid for everything while whites got a free ride!

    Today’s stock market reminds me of that hilarious episode. Just as Eddie Murphy was dumb-struck at everyone’s refusal to take his money (believing he was white), Ben Bernake is telling everyone, “go ahead, buy as much stock as you can. I’ve got your back and it will never go down again; I guarantee it!”
    Eddie Murphy couldn’t believe there were really two sets of rules back then, and the public (mostly absent in the market so far) can’t believe it today.
    The Rich, who know the game that’s being played, are, as always, getting richer, while the public, having been raised on the notion “there’s no thing as a free lunch,” just shakes its head in disbelief.

    How this is all going to end up is no mystery, ahh, but if I only knew when.

  5. Everybody calling market tops. It’s rather amusing. QE isn’t going to end in June, they will find a way to extend it. If they trail it off come June and the economy falters they’ll just threaten more QE and the market will hold in and then rally.

    Also – anybody notice Saudi’s market is up 15% over the past week??? I know I saw a post on here the other day noting the inverse, seems as if their equities are discounting an oil disruption as a low probability scenario.

    If that is true, watch oil fall apart here and equities rip higher to new highs…

  6. @B Ferro

    The Saudi market’s been up nearly 12% in the past few days, but I’m not sure I buy it. I saw several articles the past few days hinting that the Saudi government’s been buying into equities to stabilize the market and limit the fuel for Friday’s expected protest.

    Not sure if the rumors are true or not, but the planned protest on Friday and the continuing unrest in Bahrain could plunge the Saudi market at any time.

  7. 85 down yesterday and 135 up today. Just buy every single dip. This market is a broken record.

  8. Hmm, Saudi government supporting equity prices? That doesn’t sound familiar at all LOL. The Fed has implicitly been doing the same for months and it is worked brilliantly. The economy is improving and the market keeps ripping higher.

    Nothing is going lower. Nothing! The S&P500 is going to 1500 or 2000, 1450 by April.

    Price is the only thing that matters.

  9. Berro, good call out I totally missed that. It’s trading near the neckline so we shall see.

  10. ?? about “this market is a broken record”….. prior to very recently there had been no large price swings in the DJIA since august. Now triple digit swings are increasingly more common. I’d say the tenor has changed…..