We mentioned last month that the fall in crude oil prices could affect stock market prices and also have a much larger effect on the global economy as a whole.

What we saw last month was a lot of volatility, with U.S. equity markets pulling back nearly 5% mid-month, rallying back near Christmas, only to falter the last few days of the year.

As we enter the new year, concerns about the dramatic plunge in oil prices are now coupled with some serious problems in the Eurozone, as Greece could be pulling out of the Eurozone depending upon their election results. These concerns have seen the drop in the equity markets worldwide continue into the first few days of January.

Remember, while falling oil prices may be good for our pocketbook, i.e. gas prices, they are a double-edged sword. Not only is this a headwind for companies dependent upon oil and energy for their profits, but many economies such as Russia, Brazil, Venezuela, Canada, etc...heavily depend upon the sale of oil to support their countries. Now, with oil below $50 a barrel, and the cost to produce oil for most of these countries well above $50 dollars a barrel, their economies are beginning to suffer.

It is our opinion here that oil could have further to go, but in the longer term, we will see it rise again. There is no doubt it is having an effect on the markets, as evidenced by the volatility and pullbacks we have seen over the last 30 days, but we also understand that pullbacks are necessary, and markets do not run straight up. So, while a concern, it is not time to hit the panic button just yet.

We will be keeping a close eye on the events mentioned above, while also tracking the movement of the S&Pš 500 and other markets to see if support levels hold up as they have been throughout the volatility, or if they finally begin to break down.

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