Stocks, gold, commodities all down

I’m getting this post up a bit late. I had to turn off the computer after the close Friday to rest my eyes after the wild action of last week. I felt like the guy in the photo to the left. I lifted this off a site that normally deals with political news. It was attached to an article about, what else?, the falling dollar. I suspect the dollar is now firmly in bubble, or I should say, inverse bubble territory. I was in the coffee shop after the close Friday. I always read my Wall Street Journal there. I must be a curious relic actually reading a paper in this upscale coffee chop, so I always attract conversation. I’m the only person there without my nose in a laptop. I got several remarks Friday about how terrible the market is and how the economy is going down the tubes (just in time for the election). One guy sat down next to me and said he didn’t know what would happen, but he “knew one thing for sure, and that’s the dollar is going down the toilet.” Going down?! Didn’t he know that the toilet has already been flushed and reflushed several times, and the dollar has already made its way down the drain and into the sewer. I still think when the public knows what is going to happen, it probably already has. The dollar did probe to new low territory on Friday and had a fairly nice reversal bar back up, and that did improve momentum. But the trend is obviously still sharply down. I’ve learn my lesson trying to bottom pick. I have to think when the dollar turns there is going to be much blood-letting in the commodity plays. It seems momentum traders that were chasing the apple/google/etc bubbles recently just switched over to chasing commodity bubbles. The financial news media has switched to that asset class as well and hardly mentions the hot stocks of a few months ago. I think history is soon to repeat. Everybody knows that commodities have to keep going up for the next several years because of China and all the other reasons that are probably already factored into prices. What everybody knows, and what the media keeps talking about is useless information and does not give a trader or investor an edge. It is in the price. Fundamentals can drive a commodity to fair value, and then hot money and momentum chasers can push the asset far beyond any logic. Is oil really worth over $100 a barrel? Is there a shortage? Is anyone restricting supplies? Is demand really outpacing supplies? I suspect there is an increase in demand from developing countries that could account for a portion of the rise. Oil was only $10 per barrel a few years ago. I doubt that the fundamentals, even with the weak dollar, Iran, and Chavez, could account for over a ten fold increase. I read recently that there is enough oil already known to exists that would supply our needs for the next hundred years. Alarmist that have a political agenda are trying to create a sense of panic. There is enough oil. Eventually technology will find another means to create energy and render oil a thing of the past. The stone age didn’t end because of a lack of rocks.
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Stock indexes opened lower on Friday on bearish employment news, then tried to rally and were briefly in positive territory, then got hit by another wave of selling to be sharply lower, and finally some short-covering came in and the indexes were able to close about where they opened. The chart to the right of the Nasdaq/QQQQ shows a probe down into the tail of the Jan 23rd low. Prices were unable to reverse back above the yellow support line, however prices were able to close a bit higher than the open and create a bar of indecision rather than a bar with directional impulse. While the trend is still down, momentum is starting to get oversold. An upturn in momentum with a price move above support could still show signs of price rejection in this low area. The test of the January lows is getting a lot of media attention so it makes me a bit skeptical that things will just turn around here. There still may be a flush down (hopefully not like my dollar example above) before a reversal can take place. Sentiment is getting very bearish. I am still bearish, but I’m looking for any evidence, however slight, that the indexes could cycle back up, even if it is a counter-trend rally. Markets will turn long before the news turns. A rally will confound the media when even worse news is being released. It is difficult to turn bullish when bearish news is increasing daily, but that often turns out to be the best time to buy. But looking at the charts, there is so far very little reason to get interested in the long side. But that could change.

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