Oil Spill

The wild action in silver yesterday spilled over into commodities at large. It was pretty much chaos across the entire space. The CRB index itself was down about 5%.

Silver wound up getting smoked for 10% yesterday. That's a lot, but it's not super unusual for the commodity known as White Lightning.

More surprising was the move in crude, which was also down 10%. That's a big move for oil. On the week Texas Tea was down about 14%.

Technically speaking, there may be minor support for oil around these levels, but major support defined by the move off the 2009 lows rests at 90ish. I've been buying lightly around here and will probably look to get more aggressive if that 90 level actually shows up.

Although commodities were certaintly due for a correction, moves of this magnitude usually happen for a reason. Unfortunately, that reason is often not apparent until it is too late to act. What market participants need to be wondering is what situation(s), macro or otherwise, might this bearish price action in commodities be forecasting?

position in silver, oil

Energy and Macro Market Issues

Uprisings in the Middle East and Northern Africa have many market participants refocusing attention on crude oil and the energy space.

I found the above map instructive (taken from this article) as it offers a 'big picture' view of energy supply/demand worlwide.

The US position is net importer of oil (we use ~25 million barrels/day, but have production capacity of only 7 million bpd--nice data set here). The world currently consumes 80-85 million bpd of oil.

On the other hand, the US is self-sufficient w.r.t. coal (important source of electricity generation domestically).

When trying to make sense of the 'macro' picture, smart market participants factor in energy issues and the related geopolitics.

position in oil

Egypt and the S&P

Strife in the Middle East, particularly in Egypt, sent stock markets lower and crude oil higher at the end of last week.

While smaller cap indexes have already technically broken intermediate term uptrend lines, large cap stock indexes like the S&P 500 (SPX) remain in uptrends.

It is often said that trend lines on price charts should be drawn with a crayon rather than with a sharp pencil (to avoid getting too excited when prices look to be pushing thru the trend lines). As such, it appears that we would have to see price weakness thru SPX 1260 before concluding that a significant trend change may be underway.

position in oil, SPX