Friday April 26, 2019
GDP Rises 3.2%, Markets Still at Resistance
JOINT BASE ANDREWS, Md. (Reuters) - U.S. President Donald Trump said on Friday he called the Organization of the Petroleum Exporting Countries and told the cartel to lower oil prices.
"Gasoline prices are coming down. I called up OPEC, I said you've got to bring them down. You've got to bring them down," Trump told reporters.
Yahoo Finance this Friday
I nominate this quote as the official start of the Political Silly Season, the Race to Election Day November 2020.
I thought the Democrats had that award in the bag but clearly the Donald was not to be outdone.
The belief that a personal action can control the price of oil (or anything else) on a world-wide basis is the very opiate of politicians. They want us to believe they can perform magic. If this were true, oil prices would not dramatically swing from $42 to $66 and back to $62. But they instead do just that. Expect more wild promises from both sides over the next 18 months.
As we have noted here so often, social mood towards speculating on oil prices as well as pricing oil as an economic commodity determines price.
Crude oil finally topped $66 earlier this week. The media credited Trump’s squeeze on Iranian oil. But hey three days later Trump claims to have lowered prices. Indeed today oil is trading for $62.57, down 4% just today. The more likely reason is that
- WTIC is up 50% from $42 to $66 since late December, 2018.
- Momentum indicators are in the way overbought zone
- There is no shortage of supply
This drop whacked the Energy ETF XLE which had just topped its 200-day Moving average, down 1.76% today. XES Energy Service ETF never got close to its 200 day MA. This has been a continued source of concern to me as noted in many columns.
The GDP was up 3.2% for 1Q 2019. This is good news but has not moved the stock markets any further. Three weeks ago we urged caution in this space, noting markets had returned to their October 3 highs where they promptly reversed, falling 4,000 DJA points.
We have also had our eye on the precious metals markets We suggested this week would tell if gold managed to start forming a bottom. And here at the end of the week, gold has reversed from its Tuesday low at $1,270 to $1,289. This week someone bought 200,000 puts on UUP, the dollar ETF. A put is a bet the Dollar will fall enough by the third Friday of June to make this a profitable trade. The rise in gold and silver may be confirming an over bought US Dollar.
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