Weekly Market Direction 4/3-4/9

I apologize for not posting anything for the past couple of months. I have been very busy with my schoolwork this semester. We definitely see some positive economics indicators this month so far with the fourth quarter GDP growing at about 3% and the unemployment rate falling to its lowest in almost two years. As the riots in the middle east continues, we just saw the WTI jumped to $113, the highest in two years. There is a risk that the high oil prices will slow the recovery by pushing up the the inflation rate. However, I do not think it is going to happen in the near future. First of all, there is question on whether the high oil prices will sustain. We know that the supply of certain types of oil will be affected as a result of the recent political instability in the northern Africa. For example, the sweet oil produced by Libya. However, bear in mind that the Libya is just too small to be accounted for a major supplier of oil with a world market share about 2%. In addition, there is no evidence that the current situation is going to get worse. With the weapon embargo imposed on the country, Qaddafi is having really limited options to get arms to crack down the pro-Democrats. Eventually, he will be forced to negotiate or flee away. The oil prices will return to a more reasonable level in the next couple of months as people realize that Qaddafi is fighting a war that he is doomed to fail. The equity market is undergoing a big return after the bearish environment following by the recent devastating Japanese earthquake. The VIX dropped nearly 45% in just a few weeks. I am expecting the market to become a little bit more volatile in the next coming weeks as people are still waiting for more positive confirmation from the economy.