Week In Review

Emerging market equities bounced on short covering in a week where crude oil was up another 6.67 per cent and food prices increased almost 3 per cent.   India led the rebound, advancing 4.44 per cent even though the country will be one of the hardest hit by the crude oil price spike.   It’s clear to us the market is currently pricing this oil shock as temporal and not a long-term event.

The Dollar index fell again and is now down 3.33 per cent for the year.  Long-term Treasuries were down over 2 per cent and now off almost 5 per cent year-to-date.   Natural gas continues its descent, now down 11.60 per cent for the year, confirming its reputation as a “widow maker.”  Gold made a new high then pulled back.

We think equity markets are range bound until the issues in the Middle East are resolved and the markets have confidence the unrest will not spread to Saudi Arabia.  This will be a big week in Saudi politics.   Retail gasoline prices have reached $4.00 in California and some parts of country.

A healthy test of at least the 50-day moving average is in the cards for the S&P500, in our opinion, which also coincides with last week’s low around the 1294-96 level.  If that breaks,  1275 is the next level to watch.

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