After settling at their highest levels since May of 2008, US Stock markets are poised to continue their run higher, following an initial GDP reading from Q4 that beat estimates, coming in at +3%. European markets are also rallying after the ECB completed a second refinancing program, injecting more than ½ Billion Euros into their struggling banking sector.
Energy prices have been knocked back into reality this week, as a lack of “supply fear” headlines has punished the record amount of long speculators that poured into the market in the past few weeks. European Brent crude oil and gasoil diesel have led US contracts lower, although technical support levels have not yet been tested. Today is the last day for March contracts, so all the action will be in April. On a related note, we will be celebrating Feb 29 with a screening of the Pirates of Penzance in the trading room this afternoon.
Energy prices are pulling back modestly again this morning as warning cries of the economic damage caused by high fuel prices have reached a fever pitch, with many calls for government intervention being made. Given our market’s status as a political and social hot-button, it does seem likely that some action will be taken this year, with the most likely moves to be an increase in margin requirements on the exchange – making it more costly to trade in an effort to limit speculation – and potentially via another release of the Strategic Petroleum Reserve as was done last year during the Libyan conflict.
Fundamentally the US market remains amply supplied, and today’s big drop in January durable goods orders suggests that economic weakness is creeping back into the picture. Technically, energy contracts remain in a longer term bull trend targeting last year’s highs, and this week’s move appears to be nothing more than a natural correction to a larger move higher.
Most financial markets are seeing modest selling this morning, as disappointment mounts after a weekend meeting of the G20 failed to deliver on hopes that the world’s largest countries would increase the IMF’s bailout fund.
Energy prices are slipping along with stocks, although the moves are less than 1% and have done nothing to change the bullish technical outlook. Friday’s commitment of traders report showed that fresh speculative dollars continue to flow into commodities, with certain measure hitting record highs. With record long bets already placed, and energy contracts nearing their 2011 peaks, it seems that a fresh influx of funds may be needed to keep the rally from stalling out.
Headlines from the Middle East have quieted down over the past 24 hours which is helping to allow the brief respite our bull run. Don’t expect the lull to last for too long.