The Market Hits An Oil Slick

It didn’t take long for 2007 to kick into high gear and nowhere was this more evident than the hefty sell-off in the energy sector. Oil prices got slammed to start 2007 and caused an oil slick that sent the commodities sector reeling.

Aside from the immediate damage to the oil sector and energy stocks, the decline in oil prices could be the harbinger of a bigger decline in the overall world economy. What we could be witnessing here is the start of a larger, global economic correction and the first victim could be this overbought U.S. stock market.

In fact, I’ll be looking at the decline in oil and other commodity prices as a sort of canary in the coal mine with respect to the overall health of the world economy. Why? Well, because a global slowdown accompanied by a steep sell-off in many of the extremely overbought emerging markets could be followed by a sell-off in our own overbought U.S. stock market.

So far in this young year, we’ve already seen the signs of a weak domestic market. Both the Dow and the S&P 500 have kicked off the year with some sizable selling and the first week’s market action could be the start of a larger, longer downtrend in equities.

Subscribers to my Successful Investing service know that a nice downtrend in equities means a great buying opportunity ahead for those who know how to read market indicators. If you don’t want to live in fear at the prospect of a down stock market in 2007, then you need to get yourself on the path toward being a confident investor — an investor with the proven tools at your disposal to let you know when to be in, and more importantly, when to be out of stocks.

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