Selling Picks Up Overnight

On June 20, 2013 by TradingDesk

The much awaited and debated FOMC announcement yesterday had no policy change whatsoever, and no material changes in the committee’s language. Markets were flat following the release, only to sell off sharply once FED Chairman Ben Bernanke laid out the groundwork for the end of their 4 year-old quantitative easing programs during a follow-up press conference. The selling has picked up overnight, and spread across global equity and commodity markets (European stocks are down 2% and Gold is down 5%) as traders begin to deal with the potential for the free money punchbowl to be taken away over the next year.

Adding further concern to the markets are discussions that the Chairman will be stepping down in the near future, which leaves the guarantee of FED intervention to prop up financial markets (“The Bernanke Put”) in limbo.

Energy futures are joining in on the selling, although they are holding up relatively well, only dropping 1.5% so far. The pull-back after early week gains may just be typical “reversal Thursday” action, but for now, both RBOB and ULSD contracts appear to be heading back to their trading ranges after failing to break out to the upside. Yesterday’s DOE report showed only fractional changes in the supply & demand equation across the US, with the major themes of weak demand and increasing refinery output holding for another week. The real action, again, came from cash markets, where Chicago pipeline gasoline prices plunged again, marking a 99 cent decline over the past two weeks (2nd chart below). While Chicago is typically one of the most volatile markets in the country, the weakness is felt in every market east of the Rockies as summer gasoline demand this year is not even reaching the 5-year average for December.

CLICK HERE for a PDF of today’s charts

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