Stocks, Oil, Gold higher, Dollar lower

rice0416.pngThe chart to the right is a weekly continuation chart of Rough Rice on the CBT. I don’t trade this market, but it’s just another example of the runaway, parabolic price moves many commodities are experiencing. There are some fundamentals causing part of this price move, but I have to think, like so many commodities, that the main driver is the lower dollar and the effort by Bernanke and Paulson to drive the dollar down to nothing, despite what they say about a strong dollar being in the best interest of the country. There are now food riot around the globe. There are angry truckers having to pay up for fuel. Etc. Etc. There is no shortage of oil. Corn prices are skyrocketing because of the hoax of ethanol. Nearly every commodity is being fueled higher by the dropping dollar and rampant speculation and huge inflows of cash by hedge funds. Many are hurt by all this activity triggered by an irresponsible fed and treasury secretary. They must know the damage they are causing in an effort to postpone a recession and save irresponsible real estate investors and mortgage lenders. The world shouldn’t have to pay for speculation that went bad, and it was so obvious that bubble was going to burst. Now we have many more bubbles that are hurting many more people.
But I digress. Back to the chart. This is a classic exponential blow-off. The indicator below is the Commitment of Traders values for last week. The blue line are the commercial interests, or smart money. They haven’t been so smart yet as they’ve been net short for this whole move. Anything below the cyan line is a net short position, and anything above is net long. The red line are the large traders such as hedge funds, and the yellow line is the dumb money, or small traders. You can see that the commercials have increased their net short position as the move has accelerated to the upside. They will likely be right eventually. A clue will be when the large traders start to exit with the red line going back down toward the zero line. This COT position is typical of most commodities that have been in a big run-away move.
spy0416.pngThe chart to the left of the S&P etf shows the big upbar from today, with a gap up above the two previous small range balance bars. Also the momentum indicator is oversold and has just turned up. The moving average lines are still positive through the pullback, as was the case with the Nasdaq shown yesterday. I was concerned in the post yesterday that a rally early today could fail as value was being built at lower prices, causing that tail on the candle of the QQQQ to be suspect. I also suggested that a move above the two previous bars, probably on earnings news or forecasts, could alleviate that concern. The night session yesterday indicated that the market was going back into the moving average area, but often those overnight moves get reversed early the next day. But today the indexes gapped up above that resistance, continued higher all day, and closed well over both moving averages. The bulk of the move happened early in the session, and in the latter half there was quite a bit of backing and filling. Volume is still quite light, especially for such a large range day. I still can’t rule out a test back down, but that looks less likely. I hope we don’t go back to swinging 200 or 300 points back and forth every other day. The pivot eight days back is an obvious objective to overcome. If that is the case we should see volume pick up. If volume dries up even more on such an attempt, that would be quite negative. We should not see the market test back down into the tail left yesterday, or that too would be a cause for concern for the bullish case.