The bond market has retraced about 1/2 of it's losses from July highs to August lows. This is where the rubber meets the road. The yield curve shouldn't flatten any further especially after hawkish statements by the Chicago Fed Prez yesterday, unless the economy is really rolling over, which may well be the case. But one would think that we would really have a battle here for days if not weeks.
Pre opening it looks like stocks could get a bounce today. They are oversold. The hurricane looks like it will miss oil installations so crude is of its highs. But if your going to play the rallies in this type of environment, remember they are most likely going to be sharp and short.
You can almost feel the consensus build on CNBC one by one that oil is finally going to hurt the economy and markets. I might go one further and say its baked in the cake. Past price increases are now working their way through the economy and profit chains and we will see negative news flow continue to grind away. Local news yesterday reporting on the impact on local governments that operate huge fleets of school buses bracing for huge budget shortfalls as a consequence of higher gas. Isn't school just about to start
It is amazing how quickly the perspective on oil has changed. It was only 2yrs ago that oil was trading at $30 a barrel midway between its decade range of $20-40. That's when OPEC was concerned about losing market share, limiting production output, afraid of high prices causing a drop in demand, concern over alternative fuels etc. Today an analyst on CNBC is concerned over Venezuela or Iran withholding a measly hundred thousand barrels of oil for political purposes. To punish the U.S. and display their power, which they could easily do as they are awash in oil riches. It almost seems like any place that produces the stuff has potential geo political issues so that we will never return to the placid world we knew before. As I've said before price will ration supply
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