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Markets: The End Is Near

|Includes: SPDR S&P 500 Trust ETF (SPY), USO

 The markets sold sharply after opening nicely higher. This sell off is interesting because of many reasons. Most people would assume oil must be running sharply higher intra day. However, that is not the case. The United States Oil Fund LP (NYSE:USO) is trading at $42.63, +0.30 (+0.71%). Oil is off the highs but still not helping the markets bounce. The SPDR S&P 500 ETF (NYSE:SPY) finds itself trading at $131.95, -0.52 (-0.39%).  The high of the day was $133.16.

So why is the market selling sharply when oil is just slightly higher on the day and things are quiet? It is possible the end is near. What end? The markets are starting to realize the massive infusion of drugs, known as QE-2 into the market is coming to an end. As the Non Farm Payroll Report showed on Friday, job growth is starting again, economic news overall has been positive and in addition, with oil, gold and silver all spiking dramatically higher, inflation is on the move. The more inflation, the less the Federal Reserve can do to stimulate the markets artificially. Therefore, the higher oil moves, along with gold and silver, the less they can do. It is a fascinating turn of events as the Federal Reserve has been injecting hundreds of billions if not trillions in the last few years.

Think of the market like a drug addict. More and more drugs have been used to keep this market on its high. This high has seen the markets double in value since March 2009. After two years, it looks to be coming to a close. The drug addict needs to go to rehab and going cold turkey is not something any addict takes well.

Gareth Soloway