Crude surges as stocks end mixed
February 21, 2012
Crude oil surged past $105 a barrel as tensions in the Middle East continue to be escalated. Stocks were mixed; the surge in crude is not a welcome sign for the fragile economic recovery. Volume was lower than Friday’s level, but volume has been and continues to be low coming off a weekend. Gold and silver broke out as well, continuing to hint at further easing by the world’s central banks. The current uptrend is not under pressure and today was simply a pause consolidating recent gains.
Commodities continue to lead the entire market higher and there is a good reason why. Is the economy really that good to support $105 a barrel of oil? One can debate it, but I highly doubt it. Over the past few months central banks have added more than $1 trillion to their balance sheets. While we aren’t in the business of figuring out why there is a strong correlation between central bank balance sheet expansion (fancy for money printing) and asset prices. It is why you see crude oil and other commodity prices higher. It will more than likely get worse, but we’ll let other market pundits argue while we stick with our trends.
Greece finally has a deal in place for the second or is it the third time (heavy sarcasm)? From a pure arithmetic perspective Greece will have to default as it simply cannot survive with its current debt load. A more likely scenario will be further balance sheet expansion, or money printing from central banks. Bankers simply do not know another way other than to print money. While we think of these bankers as smart, they simply control the printing presses. While the printing presses are on expect to see asset prices continue to rise. Again, we’ll stick with our trends, but the correlation between money printing and asset prices is too hard to ignore.
Stay disciplined here and let your winners run. Laggards and losses are to be cut!
Crude surges as stocks end mixed
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