A Shade Of Red

While the month of February ended on an up note, the month March started on a downer, as various events combined to knock the major indexes off their lofty levels with almost non-existent rally attempts.

Red was the dominant color on most computer screens. Bucking the trend were precious metals, commodities and oil, which topped the $100/barrel mark causing fears that the economic recovery might enter stall mode.

Global tensions pushed oil and commodities higher as the fighting in Libya continued and Saudi Arabia attempted to deal with unrest in Bahrain. Not helping matters were reports that Iranian protesters had clashed with security forces.

Known and unknown uncertainties dominated the news menu today, despite manufacturing in the U.S. growing more than expected with factories adding workers and boosting production.

As I have said before, the undoing of the current market rally will very likely be caused by external events (based outside of the U.S.). While it is too early to tell if this is beginning of an extended trend reversal, or just a temporary blip, the bull has gotten pretty old and upward momentum has slowed.

The current social unrests in North Africa and the Middle East are likely to spread further, and the long term outcome is anyone’s guess. However, uncertainly is here to stay, which will bode well for precious metals.

While they had a slow start in 2011, their upward momentum has picked up, and their prospects look bright given the ever increasing number of global hotspots.

Chart courtesy of MarketWatch.com

About Ulli Niemann

Ulli Niemann is the publisher of "The ETF Bully" and is a Registered Investment Advisor. Learn more
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