25Mar2015 Market Close: Markets End Session With DOW Down 300 Points, Oil Rising And Fears Of U.S. 1st Quarter Growth Falling
Written by Gary
Market action today showed the averages traded sideways with a flavor of trending down during the afternoon session on low volume. If this trend continues, expect 2 more session of red outcome and then we will see the uptrend began again to at least the previous historical highs.
By 4 pm the markets were solidly in the red, The DOW down 300 points and the Tech Stocks taking a beating. U.S. stocks fell on today, with losses accelerating after short-term technical indicators failed, while recent winners stumbled as investors cashed in towards the end of the quarter after a gauge of industrial orders unexpectedly fell last month.
Also greasing today's decline, Goldman Sachs economist Kris Dawson said today he has scaled back his view of U.S. growth in the first quarter, following an unexpectedly weak report on domestic durable goods orders in February.
Todays S&P 500 Chart
Interestingly, WTI oil has been flirting with higher than normal highs mainly because of the disturbance in Yemen report some pundits. Interesting in that Yemen is not a player in the output of oil production whether it shuts down the fields or continues production. If anything, rebel controlled Yemen oil fields should lower the price. Exactly what is going to happen to the commodities and equities over the next few weeks is a conundrum because of the many 'issues' influencing World factors in play.
Right now, there are multiple Saudi owned super tankers in the Persian Gulf filled with crude. The Iranians also have stored crude that will hit the market as soon as the 'sanctions' are lifted because they need the financial gain badly and the Saudis want to dilute their income by releasing theirs at the same time.
That is one story, the others about storing to sell later are not fully plausible because oil has not fallen enough to make floating storage fees of $15 million a year, per tanker a financial gain.
Only a few international traders, according to Basil Karatzas, a ship broker and adviser, have the heft to buy and sit on this much oil, he says, companies such as Vitol, Trafigura and Gunsor Beheer. He says he's inundated with calls from investors who want to take advantage of the contango and buy and store oil. But it's not so easy to do.
"You have to have a special license; you have to be a registered trader with oil producers like Saudi Arabia," he says. "If you are just a financial institution, you cannot just show up in Saudi Arabia and tell them I want to buy 2 million barrels of oil because I want to speculate. They will not sell it to you."
The combination of the U.S. shale oil boom and Saudi Arabia's pricing tactics are pushing oil prices down. So the smart companies are poising their crude in oil tankers and waiting to jump on the higher oil prices in the months to come.
Right now, approximately 50 million barrels of crude oil are being stored in oil tankers offshore of South Africa and Asia.
WTI oil is at 48.97 rising from morning lows of 47.00 (Chart Here), Brent has risen to 56.24 from its low of 54.75 (Chart Here), and the U.S. Dollar is regaining lost ground now at 97.13, up from its low at 96.70 (Chart Here).
Our medium term indicators are leaning towards Hold portfolio of non-performers and the session market direction meter (for day traders) is 61 % Bullish (mostly because of rising oil today) up from 10 % bullish at the opening bell. We remain mostly conservatively bullish, but with a bearish slant. I am very concerned any downtrend could get very aggressive in the short-term and any volatility may also promote sudden reversals that will only please the day traders. The SP500 MACD has turned down, but remains above zero at +2.61. It is expect to move lower over the next few sessions before turning back up.
Having some cash on hand now is not a bad strategy as negative market changes are happening everyday. Many investors are starting to take in some profits from 'high-fliers' as a precaution and to build a better cash base for the 'dips'.
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