Dec 14, 2004

Double Double

Posted by Hello

Click on the Chart to see a larger image!

Just putting this up for perspective on how little this bounce means in the grand scheme of things.

Same story here. Both charts seem like they will need to test recent lows if they want to reverse the trend. Also if you look at the two of them you will see just how much of the gains commodities gave back relative to a shallow USD bounce. That is why I think commodities are reacting to some sort of deeper economic weakness. Maybe they are just more volatile and will quickly be setting the pace with new highs again but the charts in some (particularly silver) do not seem like charts that can move up without regaining their footing.

This commodity bounce matched nicely with today's equity rally but again, the S&P made a new 3-yr high while commodities are looking up out of a deep hole. The strength in stocks was concentrated in the cyclicals (GE and UTX) but by the end of the day it managed to pull the banks into it. C broke its 200 day moving average and is targeting its 3 month high at 47.09 and JPM looks well positioned to break its 200 day moving average shortly. The BTK is breaking out nicely from a near term inverse head and shoulders. Clearly all this is a sign that the equity market wants to go up no matter what the cross currents are in other markets.

Tomorrow is Fed day and with today's big move higher I would think we see profit taking at some point prior to the 2:15 announcement. Maybe we make a higher high in the morning but locking in some profits before 11 AM is probably a prudent move. I see no reason to initiate positions until after the meeting. The market views on the FOMC announcement seem pretty concentrated around a 25 bps hike and repetitive comments so I think with the equity run up in the face of the meeting there is extra risk associated with anything off script. Hard to imagine the market won't at least test lower hard (5 S&P points) in the 15 min. around the announcement no matter what is said.

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