we might be seeing a short consolidation in the stock market as we are seeing a period of disinflation or deflation, check out texas crude and brent prices [92.8, 102.4], the usual gap [used to be usd20+] that exists in the past two years are narrowing and fast.
what is this narrowing in price gap telling us?
prices of crude are coming down and in a fast way either because of increase in supply [thanks to us shale oil discovery] or a decline in demand [euro zone recession] or both.
no matter what the reason is, when crude prices come down, disinflation sets in, this will initially brings down the stock market [at least for oil and mining stocks] and after stabilization of prices for a while, there could be a long rally if inflation is under control. read this blog on gold n stock market on 10 mar 2013.
commodity currencies [aud, cad, nzd] are telling the same story, they are all dropping like a stone, why? as commodities would also be in a falling trend. countries producing commodities would not reap benefits as in a rising trend like 2005-7, their gdp would undoubtedly be under stress, so are their currencies.
read blog on aud cad nzd on 6 nov 2011, the conclusions then drawn are still valid even it is over 18 months ago.
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