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June 9, 2009

Cool As Hell

Today's title has nothing to do with the market and everything to do with the belated birthday gift I just received from my cousin, Beverly. Beverly is from Jacksonville, Florida and still lives in the vicinity of her home town. As such, she has had occasion to meet the lead singer of my favorite band, which also hails from Jacksonville. The band, which adopted their name from their physical education coach, Leonard Skinner of Robert E. Lee High School, is the only band for which I know the lyrics of multiple songs. I am such a fan, in fact, that I long ago parted with a some nice coin to obtain an original original... and unopened... LP of their last album, Street Survivors.

Allow me to explain what I mean by "original original." The album, which was first released three days before Lynyrd Skynyrd's plane crashed in McComb, Mississippi, featured the band standing defiantly in the middle of a street surrounded by flames. Thinking it bad taste to publish such a picture right after tragic misfortune, the album was recalled by MCA and re-released with the same picture sans flames. Well, I have an unopened LP of the original release with the original picture.

Lead singer and song-writer, Ronnie van Zant, was killed in the crash along with the most wicked guitar player ever, Steve Gaines, and several other band members. I have no doubt Gaines would be a household name had the band persevered. In any case, Ronnie's brother Johnny took over the vocalist role several years after the accident. My gift is a personal birthday wish from Johnny, framed and dated. Nice.

Okay, on to the main topic of this blog, the markets. Can't say much has really happened in the past couple days except static, which, along with being under the weather, is a reason I didn't bother with a post yesterday. We are still wating for some patterns to resolve and to see how action in the dollar unfolds. Since so much seems to be revolving around the buck these days, I will once again start there.

dollar index

One other thing... the index will also need to get below about 79.50, the high of the day that marked the daily swing low. Otherwise, the bottom was really never tested. If the buck can execute a successful retest, the odds of a sustained rally... and hence a fresh bout with deflationary forces... will increase. To be honest, I have my doubts as to whether such a scenario can unfold for reasons mentioned before, but primarily that the second bearish leg of the decline off the March high was significantly longer than the first, indicating we may be in a 5-wave decline rather than a 3-wave correction.

If the dollar fails, it will beinteresting to see whether the forces of inflation or the burdens of higher interest rates will have more influence on stock prices.

10-year treasury yield

Rising rates will pose quite a burden on higher stock prices. Likewise, such action is likely to trigger a second phase of housing crisis as higher rates eliminate potential buyers, putting further pressure on home prices.

s&p 500 chart

I'm kidding, of course, but hey, nothing else seems to be working on the equity side these days!

Gold and silver retraced portions of their recent drops. I won't bother with charts tonight since the outlook is basically the same: I'm looking for a retreat to the $14-$14.50 range on silver, which should coincide with the next surge upward in the buck. Those of you sitting around in fear of how a sustained rally in the dollar would effect metals could just buy the dollar index to hedge metals positions, as previously suggested. It depends on your personal risk tolerance and outlook, of course, but I took the hedge, and if the dollar long makes money while metals prices fall, I intend to roll the profits from the buck back into metals.

natural gas

At this point it may be safer to buy natural gas if this triangle pattern can summon the strength to resolve higher. Currently, the trend line crawl is suggestive of a lower break, so risk seems too high.

oil chart

I expect crude to succumb to resistance any day now and take stocks with it. Keep in mind that technical analysis is an inexact science. I'm not going to change my mind of crude manages to close at $72. Let's try to keep the big picture in mind and filter out the noise.

Tomorrow's Treasury auction has the potential to be a game-changing event. The market will be forced to reveal some of its hand after the results. See you tomorrow.


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