The New Reality Starts its Act
The fact that oil broke through the 98 dollar level to the downside yesterday is an indication that a new reality is now developing. The economy is not as hot as many thought and oil trading in the 90 to 98 area for the coming period is probable. This puts a ceiling on most of the markets as all rode the QE2 reflation spiral.
S&P should penetrate the important 1315 support to the downside in the coming days. While Flash Crashes are rare and most of the time when preconditions are met nothing happens. With that said, the preconditions were triggered yesterday on the close and the rest of this week will be a period of vulnerability.
Trapped Again ?? update at 10:05 AM
Did yesterdays numbers and market decline set the stage for QE3. Some pundits are saying so this morning. I hope not, but I don’t like being trapped as I was last September with the Fed’s inflation push. Maybe today’s Fed minutes will shed a little light, but the important thing is that the big market players think QE3 will always be available if things start to back off. Ironically House Republicans, a motley group of retro artists at best, are the only factor that could bring this kind of Fed action to an abrupt halt.
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