We have been saying for some time that the U.S. economy has found itself in the position that if oil spikes again even those that work will not be able to afford to drive, better yet the millions of unemployed. And that includes major industry.
For the first time since September of 2007, the crude oil (NYME_CL) market has flashed a positive signal that it is headed higher. This is the first buy signal that we have seen in over 18 months in the energy markets.
The big question is, if crude oil is headed higher, how much of a price increase can the US economy afford and withstand?
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Here is a raw commodity that is used by everyone and the U.S. has no control over. This key commodity to commerce just happens to be in areas that are normally hostile to the US. If we see a hiccup in the supply chain that changes this market dynamic, even for a short time period, we could see oil move back to the $80/barrel range in a heart beat.
So how will this affect the US equity markets? If crude oil heads back to the $75-$80 range, I expect that the major indices will head south. I call it the 551 syndrome. 5000 on the Dow, 500 on the S&P 500, and finally 1000 on the NASDAQ.
In this short video we will share with you the potential target zones we could see in the next 6 to 12 months in crude oil.
So with the trend in crude oil in a positive trajectory and the trend in the US equity markets in a negative trajectory, I think the two will feed off themselves. Look for traders and hedge funds to move aggressively in both these areas with abandon.
Lastly with no reinstatement of the up-tick rule, expect stocks to once again get pummeled to oblivion.
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2 comments:
And thinks he is helping things with his ideas like the whole stimulus bill that was pushed through, and all of this new spending. This does nothing to create long term jobs. These are all short term projects that they want to do. What are all of these people working on these projects going to do once everything is fixed? They will be jobless without any where to turn and the economy will go back down. If we are going to throw money around, lets throw some into creating jobs outside of the government. One job resource that could use a jolt of life is our manufacturing industry. I was reading articles over at americanboom.com about how much of this problem could have been avoided if we had not outsourced all of our manufacturing to China. We need to stop relying on the government to bail us out and start bailing each other out. If we support companies that employ Americans then maybe they will not move to China.
Great comment! It is time that Amerivans learn to make something that Americans can buy. What a concept U.S. citizens buying from U.S. citizens. I wonder if any politicians have thought of that one.
Thanks for commenting!
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