Sometimes, markets do not work as one is inclined to expect. For instance, when the housing and credit crisis started to really scare the markets early this year, and increasingly the talk was not if, but when the US economy would fall into a recession, energy prices moved up. 

That is not quite what one would expect. A US recession would lower world energy demand, and should lower energy prices, not increase them. What’s going on?

The point is, energy prices are priced in US dollars. The dollar sank with the US recession fears and the aggressive monetary easing by the Fed. Energy prices just moved higher to compensate for the falling dollar, apparently.

Another funny link was that the rising energy prices would be good for alternative energy stocks, like the solar sector we’re following here. This also turned out to be a dead link, as the solar sector sold off very heavily in the first six weeks of the year, when energy prices were increasing.

Now, things might reverse. The US economy is holding up surprisingly well (for now). GDP and employment figures were better than expected, and the Fed has hinted it might be done lowering interest rates.

This has been good for the US dollar, hence energy prices are coming down, although higher US growth should increase energy demand and be supportive of energy prices.

From the lows of the sell-off after the first six weeks, the solar sector has recovered pretty well. We also had a good trade in TSL from around 34 to 44, at which point we advised to take some money off the table.

It now looks like that might have been a wise decision..