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October tantrums

Published Monday, October 20th, 2014

What a week. The events and incidents are almost too numerous to mention. Notably amidst the turmoil we had a flash crash in US 10 year Treasuries; US claims to be well prepared for Ebola were found wanting; to save Kobani the US Air Force found itself having to bomb its own humvees; Greece moved back to the front line of the eurozone crisis; the VIX fear gauge moved back into the red zone; central bankers backpeddled; OPEC bickered and Germany resisted all calls to stimulate demand. The herd moves on greed and fear and for most of last week it was moving on fear.

Had you been away for a week and simply looked at the opening and closing stock market numbers Friday to Friday it would be reasonable to conclude that it was another week of ebb and flow with no dramas. The S&P down 0.66%, the FTSE 100 down 0.47% and the Eurofirst 300 down 0.99% does not look untoward. But oh how numbers can hide the reality. Last week the markets had a first class October tantrum that was approaching meltdown proportions until it was ‘saved’ by a big rally on Friday, a rally brought on by hints from central bankers that perhaps the drugs would not be withdrawn after all.

The message from last week is loud, clear and deeply worrying. This was not simply a long overdue few days of profit taking and from now on it is up, up and away until the end of the year. It was a cry of alarm. There is no confidence in the global economic recovery and in such circumstances if you remove the two drugs labelled ‘QE’ and ‘ low interest rates’ the patient becomes suicidal.

to read the rest of the report, please click here 

Posted by David Hufton