Friday
Nov 13, 2015
1-855-RWT-0008
Prepared by the good people at Random Walk, LLC. (and Scott)
Yesterday and Today
Yesterday
Rgghhhh……..BOOM! The market slowly sold off all day long to close at the lows, and down for the year. The culprit? OIL. Oil closed at 41.63 and within shot of $40. That is what people are fearing ā sub $40 oil.
Oil did mess up earnings for the year if you want to care about it. Third (3rd) Quarter earnings are almost done. As of yesterday 455 out of 500 stocks in the S&P 500 reported. Below is the results so far:
So we only hear good news, why is the market falling?
Sure, unemployment is at 5.0% and last week 271,000 jobs were created (175k expected). Interest rates are at ZERO which is ideal for stocks. We already had a correction of over 10% in August, so that is behind us. Prior to August it was hanging over our heads like the sword of Damocles.
So what is wrong?
Commodities are broken.
Spot Gold closed at $1084.60, down $100 since the same time in October.
Spot Silver closed at $14.35, down from $18 earlier in the year and $16 back in October. It is also riding down the bottom of the 200 day moving average.
As a matter of fact most commodities (soybeans, corn, wheat, etc.) are down over the last few months.
What is so bad about that?
First ā Nothing I can think of personally. As long as I am not in the business of growing soybeans, or mining for gold oil, spending less of food and gas is a great thing. As a matter of fact the low gas prices has saved the average American over $1,000.
Second ā This is what traders are thinking about.
Countries with economies that are growing require commodities to said growth. Metals are used in manufacturing, oil is used in everything. Even more food is consumed. So the declining prices of commodities can be a sign that the global economy is slowing down. Declining gold prices is usually an indication India and China’s economy is slowing down.
Third ā many commodities are used as an inflation hedge. Gold is famous as a hedge against inflation. And with the falling price of precious metals (not to mention crude oil) people are nervous that there is no growth in the global economy and no inflation.
IT does feel like we are down HUGE, but in reality we have given back only 2% from the highs. This is nothing when you consider we were up 8.3% in October. Still, it is a little concerning.
TODAY
Who Knows?
I see that we are back to trading based on Oil Prices. I suppose next week will be Greece or the Ukraine again. Throw interest rates and earnings out the window people ā we are now oil traders.
Ā
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