New Market Trends Developing

Lots of cross-currents today. But several new trends appear to be developing:

1) Stocks prisoner to oil.

Stocks began falling after oil spiked shortly after 11am ET, then hit bottom about 1pm ET as oil hit its high for the day. The CBOE Volatility Index (VIX) has followed the same pattern as oil: spiking after 11am, and dropping after 1pm.

2) The knee-jerk safe haven trade isn't working like it used to.

I mean the "when all hell breaks loose let's buy the dollar!" trade. Notice all hell has broken loose, and the dollar index is DROPPING?

Some of this appears to be do to a bet on another issue: where the interest rate hikes may be coming from. The euro is rising because it is getting more speculative flows from higher interest rate expectations, from speculation that the ECB will hike earlier than the Fed will.

3) The Great Trade of 2008/2009 is in its final death throes.

Remember the Great Trade: short dollar/long commodities/long commodity stocks — how many billions were made on that trade in the last two years? But it's history — it's not working any more, and certainly hasn't been working in the past few days.

4) Because of the uncertain environment, extreme claims get a lot more press than they normally would. The most talked about report on trading desks today was Nomura's call that oil would hit $220 if Algerian and Libyan oil production came offline. In any other environment, such an extreme call would have been laughed at, but in this environment, this most extreme of calls is the one that gets all the play...and feeds into the frenzy.

5) Watch corn. With oil touching $100, it definitely makes it more efficient to use more corn for ethanol. True, traders like to point out to me that there is a lot of skepticism regarding ethanol — a lot of money was lost in the last run (2006-2007). But corn is up 2 percent today.

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