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August 19, 2008

Morning Thoughts

An informal post this morning. Just a few thoughts crossing my mind in the early going:

  • Stocks gapped lower on the open from an already oversold condition on near-term indicators. Very bad form. The nature of the next intraday rally will tell us volumes about what comes next. An impulsive rally could indicate that this morning's selling is an exhaustion move with higher prices to come. A consolidative rally would solidify the case that we've entered the next bear leg.
  • The May-July bear move spanned 240 S&P 500 points. If we are entering a new bear move out of the July-August consolidation, the target for the SPX would be 1070!
  • The weakness in PMs this morning tells us nothing about where we are. However, the fact that miners continue to hold their own could be a clue that the next move will be higher.
  • Oil, however, is trying to spoil the game with more weakness. Only $2 away from the "magic" $110 level. If oil can hit $110 without significant weakness in metals... meaning they would be showing some fortitude... I would consider a small long trade.
  • Potential events like a major bank failure make me nervous about my idea to short the next precious metals rally.
  • A 50% retracement of oil's slump off the July high would put it back at $128. What do you think that would do to the equity markets?

 

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