Phil Flynn: Expiration Aberration

Oil prices bucked the deflationary commodity trend with a late session turnaround as traders moved to cover positions the day before the June futures contract expiration. Some traders credited the turnaround in the market to what seemed to be an increasingly optimistic Federal Reserve that raised their economic growth expectations in the release of its Fed Minutes. The Fed said in the Minutes from the FOMC meeting last April that GDP growth would range to 3.2% to 3.7% which was up from a previous forecast range of 2.8% -3.5%. The Fed also lowered its forecast for unemployment from a range of 9.5%-9.7% to a range of 9.1%-9.5%.

Of course one has to remember that these forecasts were made before the depth and gravity of the European financial crisis was clear to the market. Oh sure, the Fed did mention that the Greece crisis could impair US Markets but I do not think that they realized how bad the situation was at that time.If the turnaround in oil was all about growth expectations then why did we not see more confidence in buying some of the other commodities? Unless of course you assume that oil is going to be a leading indicator of economic growth. And the other reason we saw a snap back was due to the fact that oil is over sold.....Read the entire article.

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