Oil Ends Week Near Lows, S&P Levitates

By Tom Luongo in Currency Articles | April 20, 2013 0:56 | Tags: , , , , , ,

Let it not be said that the Federal Reserve is not dogged in their pursuit of market conditions that it deems as necessary.  Strategic commodities like oil and copper were pummeled this week and in previous weeks while the equity market on, frankly, horrific early earnings reports, continues to levitate.  With today being options expiration there was little chance of important levels being breached on the close of markets.  That is simply the way of things.

So, when one looks at a weekly chart for Brent Crude we see a close below $100 per barrel and with Copper below $3.20, both well below previous support levels, while the S&P 500 closed at 1555.25 just slightly above last week’s closing price.  So, even though this week saw a violation of last week’s low, the market is not yet ready to declare the rally over by actually putting in a bearish weekly bar.

It’s okay for everything else to crash, but not equities.  Without the stock market levitating and making what’s left of the the U.S. middle class at least comfortable with pulling small lots of money out of their 401K’s to pay for gas and food every month, we can’t actually have their balances drop very much in the process.

That’s the path to instability.

Like what we saw in the markets on Monday wasn’t unstable in the extreme. Watch for a re-test of this week’s low on the S&P next week.  If this pattern repeats itself that tells you the smart money is exiting the market underneath the late afternoon ramp to VWAP.  If Gold re-takes $1450 next week, Brent will follow suit back over $100.  Natural Gas is signaling that energy is beginning to tighten up.

About Tom Luongo
Tom is a professional chemist and self-taught economist who has been following and trading stocks for nearly 12 years. He has no formal ties to the financial industry and considers that an asset in his analysis of the interplay between monetary policy and capital markets.

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