Market Moves During Quiet Times

by: Ralph Shell

Back in the old days, prior to instant communications via smartphones, tablets or laptops, late August used to be a very quiet time. Then, the trading desks were manned by junior traders who had limited authority, merely waiting while the partners and senior traders were away, enjoying the last weeks of summer.

Having spent the last week away from my office, I personally found the instant communications to be lacking. There is a difference between knowing the last tick, however, and knowing the multiple drivers that influence the last mini trend. Perhaps it is the missing second or third screen, but more likely, it may be the many distractions when you are away.

Today the markets are reeling from the hawkish speech regarding the Syrian situation. The S&P 500 is down to 1633, 1.44%, and the Global Dow is down 1.37%. The spokesman for President Obama claims he has yet to make a decision but vessels are moving into the eastern Mediterranean and markets believe something is about to happen.

The crude market is always sensitive to Middle East conflict. Today the WTI is trading close to 109, and the Brent is trading close to 114/ barrel. Further, the price of wholesale gasoline has raced ahead today, up 2.8% to over 3.03 per gallon. With taxes and mark up this pushes the retail price of US gas ever closer to 4.00 per gallon, a level that may put the fragile US recovery in danger.

Part of the US recovery has been based on the premise the housing market has recovered. Today the Case-Shiller 20-City Index showed a double digit increase for the fourth straight month. Bob Shiller, though was cautious. He said "none of this is real, the housing market has gotten very speculative." Continuing, Shiller says, "for the long term buyer, the fact that (prices) are going up now, doesn't mean anything for where it will (be) when you sell. The market is "driven by irrational exuberance."

Perhaps the US data released Thursday will give us guidance. Is the US recovery continuing? On Thursday the US GDP annualized (Q/Q) is expected to be up 2.2% from last month's 1.7%.

Recently the USD has gained on the Canadian Dollar (FXC, [[UUP, UDN]]) Part of this was caused by the perception the USD was gaining faster than the loonie. Last week the USD moved above 1.0550, but has since retreated to below 1.05. If the US news proves a bit wobbly the Canadian dollar might continue to gain lost ground.

Besides, while the US may suffer from strong energy prices, oil is Canada's biggest export product. We believe you can try to sell the USD versus the Canadian dollar near the 1.0490 area for a sell off to the 1.03 area. For the europhobes, consider selling the euro and buying the Canadian dollar above the 1.40 area. A retreat to the 1.3750 might be possible. As always manage your money.

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Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.