Trader Talk

Energy "Crisis" Hitting The Markets

We have an energy problem with the markets right now. Volume has been pitiful since the month of April started, with the exception of the first day of the month.

Absence a catalyst (start of the quarter, for example), or positive economic stats, the tendency of the markets in this situation is to drift, and usually drift lower.

How to explain today's modest action? First, it's not that great--three stocks advancing for every two declining. Second, oversold conditions and short covering explains most of the rest. Retailers are heavily shorted, and there is a belief that the refund stimulus will be a short-term catalyst for retailers in May.

Covering shorts on the news makes some sense here, even if the news was poor.Other groups with modest upsides, like home builders, have sold off notably this week.

On top of that, financials have once again been drifting lower--every day of this week. All of them: brokers, banks, most insurance. Fannie and Freddie too.

Questions?  Comments?