Bernanke Speaks....and they all fall down!

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The U.S. stock indexes closed mixed today. The bulls were disappointed with Federal Reserve Chairman Ben Bernanke's speech to the Joint Economic Committee of the U.S. Congress. Bernanke said the U.S. is facing economic headwinds, especially due to the European Union debt crisis, but offered up no specifics on any fresh monetary stimulus package to promote more economic growth. The restrained tone of Bernanke's speech disappointed bulls who wanted immediate gratification on economic stimulus.

However, Bernanke at this time holding his cards close to his vest on the matter did not surprise most market watchers, many of whom still reckon the Fed will at some point down the road provide fresh monetary policy easing. The “Bernanke bust” overshadowed several significant market place developments that occurred earlier Thursday, led by news China has cuts its interest rate by 0.25% in an effort to stimulate its economy.

Crude oil closed down $0.85 a barrel at $84.17 today. Prices closed near the session low today. The crude bears have the solid overall near term technical advantage. There are still no early technical clues to suggest a market bottom is close at hand.

Natural gas closed down 14.6 cents at $2.275 today. Prices closed near the session low and hit a fresh six week low today. Bears have the solid overall near term technical advantage and gained more downside momentum today.

Gold futures closed down $44.10 an ounce at $1,590.10 today. Prices closed nearer the session low today and were pressured by the failure of Fed chief Bernanke to offer fresh monetary stimulus at today's testimony to Congress. The gold market bulls quickly lost their technical momentum today. Bears regained the slight near term technical advantage in gold.

The U.S. dollar index closed down 14 points at 82.63 today. Prices closed near mid range today and saw more profit taking. No chart damage has occurred this week but the bulls are fading a bit and a bearish weekly low close on Friday would begin to hint that a market top is in place. Bulls do still have the overall near term technical advantage.

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Phil Flynn: Dreariness And Downgrades

Ben Bernanke bank downgrades and unrest in Saudi Arabia. You know things are bad when the market seems to be relieved that Italy was downgraded. Is that all? Such is the fate of the global oil market that is now living and dying with the wild mood swings of perception on the outlook for the stability of the global economy. Stories that oil traders use to live and die with somehow seem not to matter quite as much.

Oil prices took out the low for the year just to spite me but is rebounding as global stock markets try to rebound. If there is a sense of economic stability, oil prices may focus on some of the things that might have rallied us yesterday. The market that is fighting fear and seasonal weakness was able to ignore reports of riots in Saudi Arabia and some bullish American Petroleum Institute data.

You know the market seems comfortable with the supply side when unrest in Saudi Arabia only seems to barley register on price. Had this happened just a few months ago, oil might have rallied $5 or $10 a barrel or more. A Shiite uprising in the oil producing Eastern Provence led to injuries to at least 11 Saudi Arabian security forces and the Saudis are inferring that perhaps Iran is to blame. The Iranians would love to cause chaos in Saudi Arabia as the Iranian regime is becoming a greater threat to the region.

Maybe that proves that money can't buy you love or security as the Saudis have spent big bucks trying to make the discontented happy. Of course when you have the scourge of Iran trying to foster unrest and instability in the region it does not help. Now that the OPEC crude oil basket fell below $100 a barrel for the first time since the beginning of the Libyan uprising, perhaps they may have to find other ways to buy love.

The API added some bullish support with numbers that surprised the most bullish among us. The market should be shocked as the API reported a 3.07 million barrel drop in crude supply and a whopping 4.97 barrel drop in gasoline supply. To round off the bullish report we saw a 1.97 million barrel drop in distillates. These are the type of numbers that should give us a short term bottom unless we get the feeling that we will see a disorderly Greek default or something.

With Ben Bernanke telling us he stands ready to act if bad things happen, it should make oil bulls feel pretty good at least for a little while. Ben helped restore a bit of confidence but still many markets are disjointed and people are questioning traditional market relationships. Is gold a safe harbor if we go into a deflationary tailspin or is it safe if things heat up in Saudi Arabia? Can you hide in oil as alternative? Or are bonds the only safe place to run to! The twist is working rate rise but will it put money back to work and make banks lend? The topsy turvy mood swings mean one thing! Get ready for some major moves!


You can catch Phil everyday on the Fox Business Network. You can also contact Phil directly at pflynn@pfgbest.com

What is Next For Gold and the SP 500

Two of our partners, J.W. Jones and Chris Vermeulen, have partnered to give us special insight on how they are trading this market and how price action in coming weeks will offer clues about what lies ahead for U.S. equity markets......

Now that Mr. Bernanke’s speech is old news, what was the financial media thinking exactly? A significant number of financial writers have been anticipating discussion of QE III or QE III Lite which clearly were never even on the Fed Chief’s radar this week. The focus of the Jackson Hole Summit was how to achieve long run growth, not conduct discussion of monetary policy.

QE III will not be discussed openly until the next FOMC meeting in September, which noticeably was extended to two days. Besides the extension and the Fed Chairman’s prediction of growth in the back half of the year, the remainder of Mr. Bernanke’s speech was nothing more than a brief synopsis of what he has already said in the recent past.

While Chairman Bernanke focuses on the U.S. economy, I have been more inclined to monitor the action across the pond. Price action in Europe is having a major impact on financial markets here in the United States. Traders are monitoring credit default swap (CDS) spreads on European sovereign debt as well as on domestic and European banks.

Recently U.S. banks have seen the CDS swaps on their debt rising indicating that the marketplace believes their debt is a greater risk to investors. While the price action is nowhere near the 2008 & 2009 levels, current prices are relatively consistent with what was seen during the correction in the late spring of 2010. While there is no reason to panic at this point, this is a trend that I will be monitoring closely going forward.

For now, I continue to believe that equity markets will rally in coming weeks as conditions are extremely oversold. The price action so far today makes sense as the wild price swings helped flush out weak hands that were long. Consequently, the snap back rally pushed shorts into stop levels as well.

A significant move lower does not seem likely at this point, but a retest of the recent lows is possible, if not probable. I would remind readers that stock market crashes generally happen within the context of an oversold market. While the likelihood of a crash is remote, it is still possible and tight risk definition in this environment is warranted regardless of which side of the tape a trader is playing.

One price chart that I have been watching closely is the German DAX. The German DAX is presently a thermometer for traders to monitor the situation in Europe. The reason the German stock market index is so important is due to the financial strength of Germany within the Eurozone. Without Germany, the Eurozone would crumble in on itself and the Euro currency would be in trouble. Recently Germany’s equity markets have been crushed and the daily chart below illustrates the recent carnage:

Another metric I monitor regularly is market momentum. The chart below illustrates the number of domestic stocks trading above their 200 period moving averages. As can be seen below, the U.S. equity market has not been this “oversold” since back in 2009. Chart courtesy of Barchart.com.

In my previous article posted back on August 18th, I discussed the likelihood for stocks to pullback and put in some form of a basing pattern. I wrote the following statement in that article:

“It is entirely plausible that Mr. Market thrusts lower from here to shake out longs. If that scenario plays out it could potentially carve out a double bottom or another basing pattern which would give active traders another entry point to get long.”

Since August 18th, we have seen the S&P 500 push lower and there is a double bottom on the daily chart which is capturing quite a bit of attention in the trading community. I would also draw your attention to the wedge pattern that is also present. A breakout higher or lower out of this wedge pattern will be the clue that will indicate Mr. Market’s short term price direction. I continue to believe we will see a breakout higher, but a retest of the lows is always a possibility. The daily chart of the S&P 500 Index is shown below:

In the short to intermediate term, I believe we will see higher prices and a test of the key S&P 1,220 area or possibly a re-test of the key S&P 1,250 price level which corresponds with the March 2011 pivot lows. Additional resistance would come in around the 1,260 – 1.270 area which marks the neckline of the recent head and shoulders pattern which triggered the selloff in the S&P 500. The daily chart of the SPX below illustrates the key resistance areas:

Gold Analysis
My most recent article argued that gold prices were going parabolic and that a pullback was likely. We have seen a major pullback in gold prices. Admittedly, I was about $200 an ounce early on my call, but members of my service were able to capitalize on an option trade that captured 32% based on maximum risk through the use of a double calendar spread. While my timing was not precise, the juiced volatility in the GLD options allowed me to roll contracts forward and make additional adjustments to produce a strong gain for the service.

Some traders argue that gold prices are going to rally back sharply in short order, which I find hard to believe. Instead, I am of the opinion that we could see additional downside in the weeks/months ahead in gold prices. There is an ominous pattern starting to form on the gold daily chart which if it is carved out and triggered, it could produce the next leg of this selloff. The daily chart of gold is shown below:

While it is far too early to determine if a head and shoulders pattern will be carved out or if lower prices take place, I am of the opinion that this selloff will offer an attractive entry point for longer term investors. At this point it is a bit too early to get involved, but if my analysis is accurate the next leg of the gold bull market will be potentially extreme.

While I believe stocks will rally in the short to intermediate term, I am of the opinion that we have officially entered the next phase of the bear market. The next wave lower in stocks is going to be just as severe as the likely rally in gold.

The reason I believe gold will rally is primarily due to future weakness in Europe. If European banks have a credit crisis, a sovereign nation unexpectedly defaults, Germany leaves the Eurozone, or a currency crisis transpires gold prices should soar while U.S. equity prices tank.

While it is far too early to make that determination, if the S&P 500 puts in a lower high on this next advance higher and consequently takes out the recent lows on a selloff, the bear will be in full swing and gold prices should take off. The chart below illustrates my expectations for the S&P 500 in the future:

The next few weeks are going to be very telling about the future in domestic markets. Is this just a correction that pushes stocks higher by the end of the year, or is this the beginning of something far worse?

For now I am going with the latter, but price action in coming weeks will offer clues about what lies ahead for U.S. equity markets. Right now this is nothing more than speculation, but the next few months should be very interesting. Risk remains exceedingly high.

Check out J.W. Jones site at  Options Trading Signals.Com for a 24 hour 66% off coupon. And sign up for Chris Vermeulens unique services at The Gold and Oil Guy.Com

Crude Oil Markets Welcome Ben and Irene over for Friday Trading

Crude oil was slightly lower in Thursday overnight trading as traders watched Hurricane Irene bear down on North Carolina threatening at least 10 oil refineries. But traders seemed to be more concerned with overall demand and how Ben Bernanke will spin the markets from Jackson Hole Wyoming today.

We are giving the oil bulls a slight near term advantage as the Stochastics and RSI remain bullish signaling that sideways to higher prices are possible near term. Closes above the reaction high crossing at 89.19 are needed to confirm that a short term low has been posted. If October renews the decline off May's high, the 75% retracement level of the 2009-2011 rally crossing at 71.73 is the next downside target.

First resistance is the 20 day moving average crossing at 86.27. Second resistance is the reaction high crossing at 89.19. First support is last Friday's low crossing at 79.38. Second support is this month's low crossing at 76.15. Crude oil pivot point for Friday morning trading is 84.96.

Warren Buffett and Lower Inventories Boost The Markets

Crude oil prices were rallying this morning as news of Warren Buffett buying 5 billion dollars worth of troubled Bank of America preferred stock hit the news wires. Rumors were already supporting the markets as traders suspect Federal Reserve Chairman Ben S. Bernanke may announce steps to boost the economy in his speech tomorrow from Jackson Hole.

Crude oil was slightly higher in overnight trading as it extends this week's short covering bounce. Stochastics and the RSI are bullish signaling that sideways to higher prices are possible near term. Closes above the reaction high crossing at 89.19 are needed to confirm that a short term low has been posted. If October renews the decline off May's high, the 75% retracement level of the 2009-2011 rally crossing at 71.73 is the next downside target.

First resistance is the 20 day moving average crossing at 86.85. Second resistance is the reaction high crossing at 89.19. First support is last Friday's low crossing at 79.38. Second support is this month's low crossing at 76.15. Crude oil pivot point for Thursdays trading is 85.43.

Markets Look to Take a Beating on Bernake Comments

Commodity and equity markets look to take a hit on Monday morning mostly due to comments made by Ben Bernanke over the weekend about his views on the possibility the economy will need additional stimulus.

Here is your trading numbers for Monday trading in crude oil, natural gas and gold.

Crude oil was lower due to profit taking overnight as it consolidates some of the rally off November's low. Stochastics and the RSI remain bullish signaling that sideways to higher prices are possible near term.

If January extends the rally off last week's low, the 87% retracement level of May's decline crossing at 90.62 is the next upside target. Closes below the 20 day moving average crossing at 85.18 would temper the near term friendly outlook.

First resistance is the overnight high crossing at 89.76
Second resistance is the 87% retracement level of May's decline crossing at 90.62

Crude oil pivot point for Monday's trading is 88.61

First support is the 10 day moving average crossing at 85.31
Second support is the 20 day moving average crossing at 85.18


Natural gas was higher overnight as it extends the rebound off last Tuesday's low. Stochastics and the RSI are turning bullish hinting that sideways to higher prices are possible near term.

Closes above the reaction high crossing at 4.515 are needed to renew the rally off November's low. If January renews the decline off the reaction high crossing at 4.515, November's low crossing at 3.853 is the next downside target.

First resistance is the overnight high crossing at 4.428
Second resistance is November's high crossing at 4.515

Natural gas pivot point for Monday's trading is 4.340

First support is last Tuesday's low crossing at 4.126
Second support is November's low crossing at 3.853

Gold was higher overnight as it continues to rebound off the mid-November low. Stochastics and the RSI are bullish signaling that sideways to higher prices are possible near term.

If March extends the rebound off the mid November low, November's high crossing at 1426.00 is the next upside target. Closes below the 20 day moving average crossing at 1379.20 would confirm that a short term top has been posted.

First resistance is the overnight high crossing at 1420.00
Second resistance is November's high crossing at 1426.00

Gold pivot point for Monday's trading is 1,402.80

First support is the 10 day moving average crossing at 1383.20
Second support is the reaction low crossing at 1352.00



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Phil Flynn: Inflation Is Good For You

As expected the Fed pumped more money into the economy and seemed to do just enough to exceed market expectations. The Fed said that they would maintain its existing policy of reinvesting principal payments from its securities holdings and intends to purchase $600 billion of longer term Treasury securities by the end of the second quarter of 2011. They will do this to the tune of about $75 billion per month. While the estimates of what the Fed would do were all over the board, the average was for the Fed to do $500 billion. The Federal Reserve was very aware of market expectations and aware that the market had priced that 500 billion with the massive move that we saw in commodities and to a lesser extent stocks.

It was clear that the Fed wanted to exceed the expectations so we would not sell the fact and take away some of the inflationary expectations they had built into this market. That's right. Inflation is not the worst thing in the world. At least that's what Ben Bernanke says and he is making it clear that worries about his policies creating inflation are over blown. He says that QE1 did not spark inflation and he does not expect that QE2 will either. In an op-ed with the Washington Post he tries to explain why he did what he did.

He says that, “The Federal Reserve's objectives, its dual mandate set by Congress, are to promote a high level of employment and low, stable inflation. Unfortunately, the job market remains quite weak; the national unemployment rate is nearly 10 percent, a large number of people can find only part time work, and a substantial fraction of the unemployed have been out of work six months or longer. The heavy costs of unemployment include intense......Read the entire article.


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Phil Flynn: Ben's Bubble!

There is no doubt that Ben Bernanke can inflate the commodity bubble and at the same time let some of the air out. Ben Bernanke has somewhat disappointed commodity bulls by not being more forthcoming about the size and the scope of the next round of quantitative easing. While today the Wall Street Journal is raising legitimate concerns about the potential backlash from his policies due not only to rising commodity prices but also the surge of investment in some emerging markets.

The Wall Street Journal writes, “The Federal Reserve's latest effort to juice the U.S. economy is making many investors in emerging-market and commodity-producing nations confident the rally has longer to run. Others see trouble ahead, concerned too many investors are jumping into the rally and that these markets can't keep raising if the U.S. economy stays sluggish.” Already this year a record $60 billion has gone into emerging-market stock and bond funds... and investors expect another $500 Billion...”. The question becomes what will happen if investors run for the exits at the same time. Commodity inflation is now thought to be......Read the entire article.


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Phil Flynn: I'm Starting With The Man With The Money

The Europeans are Asking Him To Change His Ways. And No Message Could Have Been Any Clearer; If You Wanna Make The World A Better Place, If You Wanna Make The World A Better Place Take A Look At Yourself, And Then make a change. Or stop printing some for a change. The Man in the mirror or at least the spotlight is Fed Chairman Ben Bernanke! The whole world has gone on an anticipatory tear after his promise to print more money and now some officials are fearful that this printing binge could destabilize the global economy and start a currency war.

The Financial Times says that one unnamed European official said that a further aggressive round of qualitative easing by the Federal Reserve would make US exports more competitive at the expense of its rival. This comes as an ironic situation especially considering the fact that US trade deficit hit 46.3 billion in August as imports from China continue to rise. China of course might be named a currency manipulator which could even increase the chances of a potential currency war looming ahead. This comes after the dollar hit a 15 year low against the yen and metal prices such as silver and copper soared yesterday.....Read the entire article.


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Phil Flynn: Do You Remember When OPEC Used To Matter?

It seemed like the greedy cartel held the fate of the global economy right square in their hand. Press people would stalk different oil ministers desperately trying to get a comment or a clue to whether or not they would dispense their favor on the world and pump more oil or cut production and thumb their nose at the world.

These oil ministers loved the attention. For a couple of weeks a year they were like rock stars with paparazzi following them all around. Not bad for an evil cabal of market conspirators. Yet now, even though some press is attending the OPEC meeting, the guys are not getting the attention that they are used to. It is kind of like a celebrity on the decline that is quickly becoming yesterday’s news. There is no OPEC drama.

OPEC is living the economic dream. They are one of the biggest beneficiaries of the global economic crisis. OPEC is going to leave their production quotas unchanged and will continue to cheat on production as the opportunities arise. Why change things now when times are so good? Heck why constrain production when you have the global central banks around the globe doing your heavy lifting for you?

OPEC should get on their knees everyday and thank their lucky stars for a guy like Federal Reserve Chairman Ben Bernanke who is turning out to be OPEC’s best friend. Why Ben Bernanke? I will tell you why......Read the entire article.


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Phil Flynn: How Fed Saved Oil And OPEC From A Total Price Collapse

The Federal Reserve promise to maintain the target range for the federal funds rate at 0 to 1/4 percent and maintain its existing policy of reinvesting principal payments from its securities holdings to provide additional accommodation or a second round of quantitative easing if necessary, helped the oil market ignore some of the most bearish fundamentals in decades. Just this week the Energy Information Agency reported that total U.S domestic oil product inventories hit 768.1 million barrels which is the highest level since 1990 since the Energy Department began reporting weekly data.

The figure doesn’t even include ethanol stockpiles which add to the bearishness and the fact that demands in this shoulder season is even weaker than normal. With an economic outlook that is deteriorating and a glut of supply, oil prices should be getting annihilated yet despite this historically bearish outlook, oil losses in the weakest demand period of the year are only modest. The Feds impact on the price of oil is an undeniable fact and there are many reasons for that. First and foremost is the impact of that policy on the.....Read the entire article.

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Phil Flynn: Big Bad Ben!

Commodity bears be on notice: Ben is coming to run that big bad deflation out of town. Ben Bernanke has made it clear that the Fed will step up if prices go down. Those words should bring comfort to commodity bulls that have been under assault from an array of weakening economic indicators. That worn out song “for an extended period” may change to "forever and a life time" and the Fed stands at the ready by the printing presses ready to print at a moment’s notice if price fall too far.

It is clear as Mr. Bernanke says that monetary policy continues to play a prominent role in promoting the economic recovery. And if it plays a prominent role in the economic recovery, it is a major factor in promoting the price of oil. Without the Fed's help, oil prices would be collapsing under the weight of near record supply. When the Fed takes steps to fight deflation it directly supports the price of oil. It does it in two ways. One way is because it weakens the dollar.....Read the entire article.

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Phil Flynn: 19th Market Breakdown

Ben’s the kind of person you meet at certain dismal, dull affairs, center of the crowd, talking much too, stirring' up the bulls and the bears. Well it seems to me that you have seen too much in too few years and though you try you just can't hide your eyes are edged with fears, you better stop and look around, here it comes, here it comes, here it comes, here it comes, here comes your 19th market breakdown. Oh, who's to blame, that market's just insane? Well nothing Ben does don't seem to work It only seems to make matters worse. Oh, please.

You better stop and look around, here it comes, here it comes, here it comes, and here it comes here comes your 19th market breakdown. While the oil market tried to find solace in some strong data out of Germany as its GDP jumped 2.2 in the second quarter, the fastest pace for at least two decades the market is still reeling from a dismal week and dismal initial jobless claims report that increased 2,000 to 484,000 in the week ended Aug 7, the highest level since mid-February.....Read the entire article.

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Phil Flynn: You've Got A Friend

When your down and troubled and you need a helping hand and nothing oh nothing is going right. Just close your eyes and think of Ben and soon he will be there to brighten even your darkest night. You’ve got a friend! The Fed has been the oil bull best friend but is that friendship going to start to become a little strained. With a better than expected jobs report and dissension within the committee the possibility of laying the groundwork for change is in the language in the much debated Fed Statement is rising. Let’s face it oil has been dependant on Fed policy and for all intents and purposes it has been a one sided relationship.

Now with the Fed feeling pressure to change the language about rates staying low for an extended period oil bulls may have their dreams of $85 or $90 dollar barrel oil squashed despite the illusion of their peak oil fantasies. Oh yes there are some that are betting on a change in the language even though the majority think things will not change but any hint of a softening in Fed resolve will be a big blow to oil bulls.

Oil broke the sharp intermediate uptrend and despite the fact that the move on a short term bias makes us look oversold and on target for an attempt at a recovery rally at least on a day trade basis the truth is that without more help by the Fed the oil bulls have failed to break out of the wider trading range with the highs established earlier this year. With the cheaters in the OPEC cartel beginning to meet and the Chinese more than likely to raise reserve requirements on their banks (assuming their egos and politics do not get in the way) the bulls will need a friend in Ben if they are going they have the fortitude to take oil to the next level If not then repeated failures to take out the mid eighties we will then eventually go and test the lower end of the range. Does this sound familiar?

The other help to the bulls may come from the Chinese. Now that President Obama has politicized the Chinese’s currency peg to the dollar in the eyes of the Chinese it makes it less likely that they will let the Yuan float .The Chinese says in effect that the policy of devaluing our currency to improve our competitive advantage. Well they might have a point if it were not for the fact the china pegged their currency to the dollar when the dollar was strong as well. The AFP reports that China on Tuesday dismissed calls from US lawmakers for Beijing to be labeled a currency manipulator, saying the value of the Yuan was not to blame for global trade imbalances. The comments echoed those by Premier Wen Jiabao at the weekend, who said Beijing would not yield to foreign pressure to allow the Yuan to appreciate, and warned other countries to stop "finger-pointing".

The AFP says that on Monday, a group of 130 Democratic and Republican lawmakers called on US Treasury Secretary Timothy Geithner to single out China's Yuan policy in a report due next month, saying Beijing was in effect subsidizing exports. "The impact of China's currency manipulation on the US economy cannot be overstated," the lawmakers said in the letter submitted to Geithner and US Commerce Secretary Gary Locke."Maintaining its currency at a devalued exchange rate provides a subsidy to Chinese companies and unfairly disadvantages foreign competitors." us Chinese commerce ministry spokesman Yao Jian said the strong Yuan, effectively pegged to the dollar since mid-2008, was not the reason for China's trade surplus.


Energy analyst Phil Flynn can reached at pflynn@pfgbest.com


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Phil Flynn: Bens Magic

Is Ben Bernanke losing his influence over the Energy Market? Oh sure bleak Ben told the market yesterday that interest rates would stay low for infinity and that the economy was not ready for the training wheels you come off but his words seemed to lack the wallop that his words had in the past. Oh sure we got a break in the dollar the stock market and oil dutifully rallied yet at the end of the day it does not seem to be a market game changer like Ben has given us in the past. Perhaps the reason in part that the market realizes that despite the promise low interest rates until the second coming Bens words will have less impact on the value of oil because his words will have less impact on the value of the dollar.

Over the past year it is obvious that Fed Monetary policy of negative interest rates has been the major factor in the rebound in oil. That was in part because the dollar got smashed and the imaginary belive that somehow the EURO was a better currency. Yet does anyone belive that now? On one TV screen you have Ben saying that low interest rates and are here to stay and on the other screen that Greek strikers on the other protesting financial reforms? When you look at that and no matter when you think the Fed will really raise interest rates, will it really make the dollar look worse against the Euro?

We have been living in a world of negative interest rates since last March and to be honest with you the dollar has priced in that scenario to death, Yet now that scenario is changing. Low interest rate promises by the Fed are no longer an excuse to trash the dollar and prop up the euro or even the yen for that matter. Yes the dollar may see some ups and downs yet based on the problems in the rest of the world it appears that the dollar even with low interest rates and record budget deficits the dollar is still undervalued against other global currencies. The Dollar took the brunt of the credit crisis and secretly Ben embraced that. The weak dollar set the stage for the carry trade and helped bail out global banks. Yet now despite bens pronouncement and commitment to low rates the market is showing that rates cannot stay low forever. We see record and near record spreads in the yield curve sending a signal that the market won’t stand for this forever and Ben wants to temper expectations so he can keep the carry trade money machine chugging a little longer. But with the increase in the discount rate and decision within the Fed we all know that we are getting closer to an exit every day so oil bulls cannot on the Fed and this Ben Bernanke inspired rally to go on forever

Oil bulls also bought because we are getting a winter storm in the Northeast, others because we saw an increase in gas demand. But won’t one offset the other? The Energy Information Agency reported a surge in refinery runs to an unimpressive level of 81.2%. The EIA reported that crude inventories increased by 3.0 million barrels, gasoline inventories decreased by 0.9 million barrels and distillate fuel inventories decreased by 0.6 million barrels.

Long term Phil is still bearish on oil. You can contact Phil by emailing him at pflynn@pfgbest.com! Also you can see Phil online today on Fox Business network online and on TV. Check it out!

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