Keep The Oil Price In Mind

The price of oil has dropped by about $10 a barrel since early April. The rallies in the stock and bond markets and, to a lesser degree, the recent break of trend in gold heavily reflect the weakness in oil and its implications for inflation. The recent tape talk and US oil inventory data have favored lower oil. But oil is heading toward a short term oversold position and the bond and stock markets are heading into overbought territory. If you are a short term player in the capital markets, this situation begs to have you watch the oil market as carefully as your stock and bond positions.