A couple of factors wewe involved in todays sell off
in the stock market. Option expiration tomorrow which always
leads to a great deal of volatility in the markets, especially a few days before. Secondly, some bearish comments from Abby Cohen,
chief economist at Goldman. Last week she was saying that the market was going to move to new all time highs. This morning she was saying that interest rates would be moving higher. Todays traders who bought on her comments last week, sold on her comments this morning which drove the market down. Positive momentum over the last few weeks is beginning to turn to the downside, and the inability of the bond market to rally in the face of todays news was another disappointment.
The CPI was announced to be up a neutral .2%, inline with expectations.
Traders are looking towards Mondays announcement from the Japanese government on a tax cut to stimulate their economy. The talk of this spurred interest in the Japanese Yen today which sent the Yen sharply higher against the dollar. The Yen has yet to move above the recent highs, and will take another surge to turn the trend upward. Given the recent events, it appears that the Yen may be ready to break out.
Yen up today 95 pts. at 8419.
Little reason to believe that we will see gold and silver prices regain the strength we saw a few weeks ago. We knew we had a problem last week when we failed to rally in the face of a very bullish producer price index that showed inflation moving higher. As we can see today with the underlying weakness in the market, prices moved thru the critical support area on the neutral CPI report. Silver moved back below the $5.00 critical support, which is a negative technical and psychological indication since the market failed to rally on positive news, and collapsed on neutral news. Silver will test the next support area at $4.83. Dec Gold lost $1.30 to close at
$326.80, Dec Silver down .157 at $4.91, Jan platinum down $10.40 at $429.50.
Given the degree and depth of the selling we saw over this past week, I do not believe that we have seen the last low in the crude oil market. Prices have yet to fill the gap from Monday mornings gap lower open which will keep the bulls on the defensive. We are now entering the weak seasonal downtime, from mid October to mid January. Recently the API reports have been bearish for the market. We may have a short covering rally here, but I would view it as a good selling opportunity. Dec crude up .39 at $21.09.
The USDA weekly export figures were delayed by the Columbus day holiday. Traders want to see if the recent gains in soybeans were justified by the demand - good export numbers. The harvest has been slowed by the recent rains and some cold weather moving into the mid west. Technically, the markets still appear to be positive, with the gap from last Friday still holding, so the bulls still appear to be in control until we fill these gaps. The trend is still to the upside.
Nov beans down .0225 at $7.0225, Dec wheat down .045 at $3.6525,
Dec corn down .03 at $2.87.
The bond market has led the stock market by about a week. We saw it make a bottom at the end of July - beginning of Aug., and start moving up. A week later the stock market followed. The same thing happened at the end of Aug where we saw the bond market make a low and start moving up. About a week and a half later, we saw the stock market starting to move. The bond market turned down last week. The stock market has started its decline, we broke some critical support levels. The next support comes in at 7900. If that is broken then 7840 would be the next target on the downside.
The gold market will eventually have its day in the sun. Indicators tell me that unless we rise above $327 Dec, very soon, we could have a MAJOR decline in gold short term. |
