Technical View Points To Further Breakdown In Refined Products

On June 21, 2012 by TradingDesk

The FOMC announced that it would extend its current bond trading program, known as “Operation Twist”, another 6 months through the end of the year, and also set the table for the conditions needed for it to begin a new Quantitative Easing (asset buying) program, known as “QE3”. To put it more simply, the Fed just checked its hand, now we’ll see if the ECB will bet. The lack of an immediate stimulus left markets disappointed, with heavy selling across the board seen immediately after the announcement. Stocks rebounded by the end of the trading session however, cheered by news that the money printing could begin before the end of the year.

Global markets are slipping modestly lower this morning, as Chinese, German, and Eurozone manufacturing data showed that factory activity in each has contracted for yet another month, and as Spain was forced to pay another record high yield to issue new 5 year debt.

While stock markets have performed well over the past week, energy commodities have taken another beating, and are again trading at their lowest levels of the year, with WTI trading below $80 overnight. The correlation between stocks and energy prices over the past several years has been extremely strong – often over 90% – so this recent disconnect bears watching, as it will likely dictate where we go from here. On a purely technical standpoint, we’re facing a breakdown in prices, that should send refined products down another dime in the near term.

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