Oil prices tumbled on Wednesday to their lowest levels in a year and a half, with declines extending into the close, even as the S&P moderated and pared losses.
And trader Josh Brown believes the action is the equivalent of the oil market jumping up and down trying to get your attention.
He sees the weakness as a leading indicator - one that says global growth is facing serious challenges.
And those challenges are probably due to two factors.
1. “We’ve got a fiscal cliff coming,” says Brown. That is companies will be immobilized by the tax increases and spending cuts that are all scheduled to take effect at the very beginning of 2013. Although it’s widely believed lawmakers won’t allow the economy to go off the ‘fiscal cliff’ the Street has no expectations of a resolution until after the November election, at the earliest. Therefore the belief is companies will be reluctant to either spend or create jobs anytime soon.
2. “Nasty stuff in Europe still lies ahead,” Brown adds. Largely the Street believes the financial woes of Spain and Italy will flare before the summer ends. Trader Jon Najarian of OptionMonster says if the the Europe crisis were a football game we’d be at the end of the second quarter. In other words, a lot of crisis to come.