Jamie Dlugosch

It Just Wasn't Good

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Oil traders move the focus to the April contract. Hovering just above $40 we are seeing new starting lows on the contract per each monthly expiration. The past few expirations have resulted in a new contract trading in the mid-$40's on average.

The weakness in crude can be expected to continue until the March OPEC meeting. The cartel can be expected to add more production cuts if oil trades in the $30 range. Keep in mind they are shooting for a target of $70. The summer driving season is nearing thus crude may be supported there, but any strength is likely to be offset by weak economic data. Most now expect 2009 to be poor with recovering happening in 2010. We could easily lose $10 from current levels.

On Sunday word leaked that the government was looking at providing more aid to wounded Citigroup (C). The deal would potentially increase the government's position in the company to 40% including a conversion of preferred stock to common shares. This partial nationalization appears to be the preferred method of government involvement.

Investors should be cheered by the news as the deal removes uncertainty and eliminates a complete elimination of current shareholder interest. It would seem to be a good deal for the government as well as shares could be sold at some later date allowing for a return of capital that may or may not include investment return.

Global stocks like the deal and are starting the week on a positive note. Japan recovered losses to close down .5%. Hong Kong gained nearly 4%. In Europe stocks opened higher. Germany and France were outpacing Britain with gains of more than 1%. Britain was only up fractionally in early trading there.

Dow futures are taking the same cue and are up more than 50 points. Hopefully traders were able to clear out the cobwebs over the weekend. If we get the fear out of the system we could see a powerful rally.

I expect stocks to gain this week as it is the end of the month. Money managers do not get paid to sit on cash. Look for them to deploy this week before the February period ends.