Death knell of the commodities supercycle: $70 oil by Halloween
Today's Financial News - Posted October 15, 2008
Bad news on retail sales and economic growth spell the end for the commodities supercycle. Crude oil prices will break through $70 before the month is over.
by J. Christoph Amberger
Baltimore — (TFN): “What a craptastic day for the markets,” said TFN’s Andy Snyder after the U.S. markets had beaten the Crash of 1987, closing almost 8% down.
“I think tomorrow will be yet another make or break day. If we drop below last week’s lows, we could be in for some serious trouble. But if we hit a bottom and bounce back (which is my bet), we should create a floor and have some more upside opportunities. There are a ton of option plays we can take advantage of.”
Asian trading might foreshadow yet another drop on Thursday. Japan’s Nikkei index fell by about 10% in early trading. The indexes in Australia and South Korea dropped by at least 5%. Taiwan chalked down losses of more than 3%.
But in recent weeks, despite all their talk about decoupling, foreign markets have followed rather than anticipated the movement of the U.S. markets. In fact, an 8% drop looks like a prime candidate to be followed up buy a short-term 3-4% gainer.
No matter where stocks are headed on Wednesday, oil promises to be the big loser. Fed Chairman Bernanke warned on Wednesday that the US economy now faced a “significant threat” from the credit crisis.
That dovetails with recent predictions of the IMF and various national governments. Combine it with the most recent retail sales numbers in the United States, and it’s the temporary death knell of the commodities super cycle. Oil will hit $70 before you hear your neighbor’s little Pugsley say “Trick or Treat!”.
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