A Replay of January?
02/06/2015 12:01 am EST
Many of the same market forces that dominated the markets in January are likely to be the key as we start February says MoneyShow's Jim Jubak.
It's a different calendar page, but so far February looks like January; the same dynamics, same market trends, and the same tradeoffs, so for the week ahead, the month ahead, see whether this continues to hold.
What we're seeing in the first few days of February is that, well, when the euro seems to stabilize, the dollar stops going up and maybe indeed goes down, so that's the tradeoff pair that exists. That's related to the risk on risk off when the euro looks like it's plunging, when emerging markets look like they're in difficulty because of a plunging euro, you see money flowing into the yen, into gold a little bit and again into the dollar, so that's the dynamic in January and that's what we're seeing in early February and we're also seeing a sense of the commodities market being driven not so much by fundamentals, but by short shorts, traders who sell stocks, betting that they're going to go down, looking at price levels and going oh, okay, at this level when oil is at 51, it looks like a good time to short because if it goes down to 45 that's a pretty decent profit. If it's at 45 it might be time to cover the short because well it might be going lower, but there's not a big incentive there to stay short in the market when it's at that level.
That's what we're seeing, because they're all short-term things. There is really not a whole lot of trend here. I think the market as a whole is waiting to see a trend, waiting to see whether growth is going to pick up, whether growth is going to fall down, whether the European Union and the European Central Bank are going to somehow solve the growth problem, the inflation problem, or lack thereof, and the question of the Greek exit, the question of what is going to happen with China and oil demand.
All of those things we're waiting to get some kind of answer for and in the meantime what we're seeing is this relatively short term action in the same patterns that ruled most of January extending into February and what to look for, to see whether that holds in the weeks ahead.