Both commodity and equity markets are moving in the same direction these days. If oil, gold and corn are going up, so seemingly are stock prices. It’s really a simple analysis I suppose. The marketplace figures that, if commodity prices are going down, then so is global demand. This means that economies are getting weaker; therefore, stock prices should go down. And, the opposite is true, especially with oil.

The commodity price cycle is not over and price strength is now favoring agricultural commodities, which are experiencing strong increases in demand from emerging markets. Supplies have also been tight due to poor weather conditions in the big bread baskets of the world.

I think this pricing trend will stay with us for a while. Sentiment for stocks is fragile enough that investors seem to be requiring some sort of confirmation from other capital markets in order to be serious bidders. If the prices of oil, silver and wheat are strong, then so is the outlook for the underlying economy.

It’s a peculiar market for stocks at this time. You always have the usual predictions, like stocks are about to crash or it’s the beginning of a new era; but, frankly, I see share prices just following earnings. Whatever performance corporations generate, it dictate the trading action in stocks. I still call this a bear market for stocks. We’ve been in it for years. As earnings grow incrementally over the coming quarters, so will the main stock market averages. There’s no bull market yet. This won’t happen until the housing and employment markets improve significantly.

Stock picking in the current type of environment is always difficult before earnings are reported. It’s a total gamble as to whether a company will beat or meet estimates, or disappoint the Street. There will be money to be made on event-driven trading surrounding good earnings and/or visibility, but you can’t expect any lasting price trends with event-driven trades. There remains too much uncertainty in global markets and the probability of a short-term trade turning into a good medium-term investment is low. So, it’s an environment where investors have to be nimble and willing to change their positions as market action unfolds. Sometimes, it’s more difficult to hit the sell button. The volatility in U.S.-listed Chinese shares and precious metal stocks certainly illustrates the point.

Over the next four weeks, the headlines will be about large, brand-name companies and whether they beat consensus. If the financials were to surprise investors to the upside, then I think the stock market could rally quite a bit. It will also be very interesting to see what large technology companies have to say about their businesses. This is a group that’s been lagging lately and is required for any bull market to unfold. Whatever the news, I think this is a market now that wants to go higher. An S&P 500 Index over 1,300 represents positive investor sentiment for the future.