Views From The Hill

View From The Hill (Feb-3-2016): Energy Bears Endure Costs of Weaker US Dollar


bulls-and-bears4For a moment it looked like equities were beginning to decouple from the movements in crude oil, but the energy commodity still holds plenty of sway with investors. There is no new news regarding crude oil. Everyone who is anyone knows of the oversupply story except for some of the major producers like OPEC, Russia and North America who all continue to drill and pump without pause. So, when the EIA released surplus numbers exceeding estimates for energy inventory supplies, common wisdom dictated that oil prices should fall on such bearish news or, at most, increase modestly. Initially, oil prices did fall, but then reversed with an unexpected 9% plus move in WTI crude oil.

One should not underestimate the power of the Almighty US Dollar. Even when it is weak, it is still strong enough to move both equity and energy markets. Lest we all get overexcited, I will remind readers that the trends for equities remains bearish. Today’s SP-500 rally off the 1872 and close above psychological resistance at 1900 was quite impressive. However, bulls driving equities above the January high @ 2081.56 would impress me more. With a bias to the downside, I’d be suspicious of any ensuing rallies and not surprised to see another retest of support @ 1870 levels and maybe even 1812 for good measure.

Signing off @ Hillbent…



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