Some are wondering why oil would go up with bearish supply data.

Well, look at the chart for the dollar today. It was down about .8 of a percent. Oil price moves inversely to the dollar at about $4 to 1% if there is no supply data.

Thus, oil without a bearish supply report Wed would have moved up about $3.20 but, the bearish report kept it under $2 or over $1.20 below where the normal move in the dollar would put it.

So, markets are working but it is two markets. One is the market for the dollar that oil is priced in and the other is for oil itself.

That is why we have to watch so closely what the FED and Treasury are doing to the value of the dollar. If they cause the dollar to fall back to the 71 level when we saw $145 oil, we could see $100 oil and more even with bearish supply data.

The FED and Treasury have the ability to cause us a lot of misery if they cause inflation (money supply, not prices) to drop the value of the dollar globally due to oil being priced in dollars. We could actually pay more while the currencies the dollar falls in relationship to, see no increase.

One comment today was that energy price rise was one reason for the rally today. If so, that is not good news as it would seem to indicate a dollar weakness more than a real value rally in stocks.

(currently shows down .9 of a percent for the dollar)

http://quotes.ino.com/chart/?s=NYBOT_DX&v=dmax

Related Posts:

• Where is your money going to go?
• Hard to disagree with any of these points about the coming double dip recession.
• The dollar was as high as 89.624 in March 2009, and is down 14 points in the 8 months since then.
• Tonight the President said we need to lay a new foundation for growth.
• Oil is a good play for several reasons:

Leave a comment